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GuruFocus has detected 6 Warning Signs with Kellogg Co $K.
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Kellogg Co (NYSE:K)
Beneish M-Score
-2.82 (As of Today)

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

Kellogg Co has a M-score of -2.82 suggests that the company is not a manipulator.

K' s Beneish M-Score Range Over the Past 10 Years
Min: -3.01   Max: -0.97
Current: -2.82

-3.01
-0.97

During the past 13 years, the highest Beneish M-Score of Kellogg Co was -0.97. The lowest was -3.01. And the median was -2.54.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of Kellogg Co for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 1.0099+0.528 * 0.9565+0.404 * 1.0202+0.892 * 0.9633+0.115 * 0.9818
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9973+4.679 * -0.0644-0.327 * 0.9941
=-2.82

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $1,464 Mil.
Revenue was 3254 + 3097 + 3254 + 3268 = $12,873 Mil.
Gross Profit was 1204 + 976 + 1264 + 1270 = $4,714 Mil.
Total Current Assets was $3,146 Mil.
Total Assets was $15,427 Mil.
Property, Plant and Equipment(Net PPE) was $3,576 Mil.
Depreciation, Depletion and Amortization(DDA) was $523 Mil.
Selling, General & Admin. Expense(SGA) was $3,397 Mil.
Total Current Liabilities was $4,732 Mil.
Long-Term Debt was $6,715 Mil.
Net Income was 262 + -53 + 292 + 280 = $781 Mil.
Non Operating Income was 3 + -69 + 3 + 4 = $-59 Mil.
Cash Flow from Operations was 211 + 607 + 373 + 643 = $1,834 Mil.
Accounts Receivable was $1,505 Mil.
Revenue was 3395 + 3142 + 3329 + 3498 = $13,364 Mil.
Gross Profit was 1245 + 962 + 1233 + 1241 = $4,681 Mil.
Total Current Assets was $3,219 Mil.
Total Assets was $15,297 Mil.
Property, Plant and Equipment(Net PPE) was $3,617 Mil.
Depreciation, Depletion and Amortization(DDA) was $518 Mil.
Selling, General & Admin. Expense(SGA) was $3,536 Mil.
Total Current Liabilities was $5,162 Mil.
Long-Term Debt was $6,256 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(1464 / 12873) / (1505 / 13364)
=0.1137264 / 0.11261598
=1.0099

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(4681 / 13364) / (4714 / 12873)
=0.35026938 / 0.36619281
=0.9565

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (3146 + 3576) / 15427) / (1 - (3219 + 3617) / 15297)
=0.56427043 / 0.55311499
=1.0202

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=12873 / 13364
=0.9633

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(518 / (518 + 3617)) / (523 / (523 + 3576))
=0.12527207 / 0.1275921
=0.9818

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(3397 / 12873) / (3536 / 13364)
=0.26388565 / 0.26459144
=0.9973

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((6715 + 4732) / 15427) / ((6256 + 5162) / 15297)
=0.74201076 / 0.74642087
=0.9941

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(781 - -59 - 1834) / 15427
=-0.0644

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

Kellogg Co has a M-score of -2.82 suggests that the company will not be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Kellogg Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.8851.11880.87320.95081.04571.1150.9980.90531.1440.9829
GMI 1.00591.05070.97640.99491.10391.01990.92771.18811.00330.9472
AQI 0.98031.00231.00220.97430.95591.12711.02240.98361.03681.0343
SGI 1.07971.08880.98070.98581.06461.07571.04190.98570.92760.9622
DEPI 1.00670.97611.0021.0161.10160.95450.87361.02970.91611.0157
SGAI 1.00250.9471.01250.98891.05870.96630.80961.25470.95820.9727
LVGI 0.97211.08480.91361.0741.023610.93961.03461.06261.0237
TATA -0.0349-0.0096-0.03650.0235-0.0602-0.0541-0.0003-0.0773-0.0647-0.0577
M-score -2.67-2.33-2.77-2.46-2.63-2.50-2.44-2.90-2.72-2.81

Kellogg Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.90530.95460.9480.97591.1441.07851.12211.11240.98291.0099
GMI 1.18811.26891.28711.24911.00330.95280.90960.90680.94720.9565
AQI 0.98360.99411.00291.03581.03681.04521.02231.00051.03431.0202
SGI 0.98570.9810.97020.9540.92760.92840.92450.93970.96220.9633
DEPI 1.02970.99770.94841.03830.91610.97591.01521.01011.01570.9818
SGAI 1.25471.25161.21551.23430.95820.94980.97980.95850.97270.9973
LVGI 1.03461.04161.05641.04291.06261.07491.08821.04971.02370.9941
TATA -0.0773-0.0793-0.0845-0.0735-0.0647-0.0594-0.073-0.0673-0.0577-0.0644
M-score -2.90-2.83-2.86-2.79-2.72-2.77-2.84-2.80-2.81-2.82
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