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GuruFocus has detected 5 Warning Signs with NRG Energy Inc $NRG.
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NRG Energy Inc (NYSE:NRG)
Beneish M-Score
-2.86 (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.

NRG Energy Inc has a M-score of -2.86 suggests that the company is not a manipulator.

NRG' s Beneish M-Score Range Over the Past 10 Years
Min: -4.02   Max: 1.39
Current: -2.86

-4.02
1.39

During the past 13 years, the highest Beneish M-Score of NRG Energy Inc was 1.39. The lowest was -4.02. And the median was -2.44.


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 NRG Energy Inc 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 * 1.1334+0.528 * 1.0382+0.404 * 1.0207+0.892 * 0.8442+0.115 * 1.0432
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1073+4.679 * -0.0771-0.327 * 1.0555
=-2.86

* 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 $974 Mil.
Revenue was 2759 + 2532 + 3952 + 2638 = $11,881 Mil.
Gross Profit was 634 + 715 + 1159 + 882 = $3,390 Mil.
Total Current Assets was $5,440 Mil.
Total Assets was $29,420 Mil.
Property, Plant and Equipment(Net PPE) was $17,942 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,477 Mil.
Selling, General & Admin. Expense(SGA) was $1,118 Mil.
Total Current Liabilities was $4,197 Mil.
Long-Term Debt was $17,672 Mil.
Net Income was -163 + -987 + 402 + -271 = $-1,019 Mil.
Non Operating Income was 15 + -123 + -33 + -61 = $-202 Mil.
Cash Flow from Operations was -68 + 339 + 860 + 319 = $1,450 Mil.
Accounts Receivable was $1,018 Mil.
Revenue was 3229 + 3011 + 4434 + 3400 = $14,074 Mil.
Gross Profit was 1035 + 778 + 1392 + 964 = $4,169 Mil.
Total Current Assets was $7,346 Mil.
Total Assets was $32,680 Mil.
Property, Plant and Equipment(Net PPE) was $18,763 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,617 Mil.
Selling, General & Admin. Expense(SGA) was $1,196 Mil.
Total Current Liabilities was $4,338 Mil.
Long-Term Debt was $18,677 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)
=(974 / 11881) / (1018 / 14074)
=0.08197963 / 0.07233196
=1.1334

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)
=(4169 / 14074) / (3390 / 11881)
=0.29621998 / 0.28532952
=1.0382

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 - (5440 + 17942) / 29420) / (1 - (7346 + 18763) / 32680)
=0.20523453 / 0.20107099
=1.0207

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
=11881 / 14074
=0.8442

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))
=(1617 / (1617 + 18763)) / (1477 / (1477 + 17942))
=0.07934249 / 0.07605953
=1.0432

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)
=(1118 / 11881) / (1196 / 14074)
=0.09409982 / 0.08497939
=1.1073

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)
=((17672 + 4197) / 29420) / ((18677 + 4338) / 32680)
=0.74333787 / 0.70425337
=1.0555

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
=(-1019 - -202 - 1450) / 29420
=-0.0771

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.

NRG Energy Inc has a M-score of -2.86 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.

NRG Energy Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.22460.83421.4520.84771.10751.37140.85320.77510.94641.1973
GMI 14.67730.52741.29221.22030.94880.9671.09520.96270.8659
AQI 0.92130.8441.24691.12290.76350.95360.97121.25780.85830.9693
SGI 1.06671.1541.30020.98851.0260.92761.34111.40490.92480.8417
DEPI 0.40211.54960.43621.27090.84211.40390.84260.930.82131.0675
SGAI 1.16360.68021.33771.14790.95511.48460.82690.8081.28681.079
LVGI 0.96451.09050.86280.9711.20321.00551.00991.03031.17041.0383
TATA -0.0568-0.0066-0.056-0.0454-0.0131-0.033-0.045-0.0336-0.2361-0.0825
M-score -2.60-0.56-2.29-2.62-2.48-2.44-2.54-2.31-3.90-2.93

NRG Energy Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.77510.80390.79850.87630.94640.99451.06351.12811.19731.1334
GMI 1.09521.12270.9840.92580.96270.8490.86530.91310.86591.0382
AQI 1.25781.24171.12940.99340.85830.81650.85330.80230.96931.0207
SGI 1.40491.27651.1941.09560.92480.86820.83250.80920.84170.8442
DEPI 0.930.91020.81060.82160.82130.89410.92710.9711.06751.0432
SGAI 0.8080.93221.00281.10721.28681.30091.27451.1861.0791.1073
LVGI 1.03031.01240.98180.98041.17041.15651.19291.18411.03831.0555
TATA -0.0336-0.033-0.037-0.0452-0.2361-0.2361-0.2555-0.2401-0.0825-0.0771
M-score -2.31-2.41-2.64-2.79-3.90-3.98-4.02-3.88-2.93-2.86
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