Plains GP Holdings LP Beneish M-Score Calculation
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski 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 Plains GP Holdings LP 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 * 1.0212 | + | 0.528 * 1.1342 | + | 0.404 * 0.8835 | + | 0.892 * 0.6918 | + | 0.115 * 0.8769 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.3255 | + | 4.679 * 0.0364 | - | 0.327 * 1.1043 |
| = | -2.65 |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
| This Year (Dec20) TTM: | Last Year (Dec19) TTM: |
Accounts Receivable was $2,553 Mil.
Revenue was 5963 + 5833 + 3225 + 8269 = $23,290 Mil.
Gross Profit was 371 + 565 + 534 + 733 = $2,203 Mil.
Total Current Assets was $3,668 Mil.
Total Assets was $25,951 Mil.
Property, Plant and Equipment(Net PPE) was $14,998 Mil.
Depreciation, Depletion and Amortization(DDA) was $656 Mil.
Selling, General, & Admin. Expense(SGA) was $276 Mil.
Total Current Liabilities was $4,255 Mil.
Long-Term Debt & Capital Lease Obligation was $9,699 Mil.
Net Income was -20 + 17 + 16 + -581 = $-568 Mil.
Non Operating Income was 19 + 5 + 31 + -3077 = $-3,022 Mil.
Cash Flow from Operations was 257 + 281 + 83 + 889 = $1,510 Mil.
|
Accounts Receivable was $3,614 Mil.
Revenue was 9154 + 7886 + 8253 + 8375 = $33,668 Mil.
Gross Profit was 757 + 874 + 861 + 1120 = $3,612 Mil.
Total Current Assets was $4,614 Mil.
Total Assets was $29,969 Mil.
Property, Plant and Equipment(Net PPE) was $15,833 Mil.
Depreciation, Depletion and Amortization(DDA) was $604 Mil.
Selling, General, & Admin. Expense(SGA) was $301 Mil.
Total Current Liabilities was $5,019 Mil.
Long-Term Debt & Capital Lease Obligation was $9,574 Mil.
|
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Accounts Receivable 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) |
| = | (2553 / 23290) | / | (3614 / 33668) |
| = | 0.10961786 | / | 0.10734228 |
| | = | 1.0212 |
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) |
| = | (3612 / 33668) | / | (2203 / 23290) |
| = | 0.10728288 | / | 0.09458995 |
| | = | 1.1342 |
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 Property, Plant and Equipment to Total Assets.
| AQI | = | (1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) | / | (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1) |
| = | (1 - (3668 + 14998) / 25951) | / | (1 - (4614 + 15833) / 29969) |
| = | 0.28072136 | / | 0.31772832 |
| | = | 0.8835 |
4. SGI = Sales Growth Index
Ratio of Revenue 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 |
| = | 23290 | / | 33668 |
| | = | 0.6918 |
5. DEPI = Depreciation Index
Measured as the ratio of the rate of Depreciation, Depletion and Amortization 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)) |
| = | (604 / (604 + 15833)) | / | (656 / (656 + 14998)) |
| = | 0.03674636 | / | 0.04190622 |
| | = | 0.8769 |
Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.
6. SGAI = Sales, General and Administrative expenses Index
The ratio of Selling, General, & Admin. Expense(SGA) to Sales 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) |
| = | (276 / 23290) | / | (301 / 33668) |
| = | 0.01185058 | / | 0.00894024 |
| | = | 1.3255 |
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 in leverage
| LVGI | = | ((LTD_t + CurrentLiabilities_t) / TotalAssets_t) | / | ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1) |
| = | ((9699 + 4255) / 25951) | / | ((9574 + 5019) / 29969) |
| = | 0.53770568 | / | 0.4869365 |
| | = | 1.1043 |
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 |
| = | (-568 - -3022 | - | 1510) | / | 25951 |
| | = | 0.0364 |
An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.
Plains GP Holdings LP has a M-score of -2.65 suggests that the company is unlikely to be a manipulator.
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