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GuruFocus has detected 5 Warning Signs with Norfolk Southern Corp $NSC.
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Norfolk Southern Corp (NYSE:NSC)
Beneish M-Score
-2.63 (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.

Norfolk Southern Corp has a M-score of -2.63 suggests that the company is not a manipulator.

NSC' s Beneish M-Score Range Over the Past 10 Years
Min: -4.29   Max: 1.94
Current: -2.63

-4.29
1.94

During the past 13 years, the highest Beneish M-Score of Norfolk Southern Corp was 1.94. The lowest was -4.29. And the median was -2.68.


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 Norfolk Southern Corp 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 * 1.0717+0.528 * 0.968+0.404 * 1.0354+0.892 * 0.969+0.115 * 1.0539
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0001+4.679 * -0.0386-0.327 * 1.0283
=-2.63

* 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 $998 Mil.
Revenue was 2575 + 2490 + 2524 + 2454 = $10,043 Mil.
Gross Profit was 1775 + 1682 + 1769 + 1694 = $6,920 Mil.
Total Current Assets was $2,327 Mil.
Total Assets was $35,145 Mil.
Property, Plant and Equipment(Net PPE) was $29,927 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,037 Mil.
Selling, General & Admin. Expense(SGA) was $2,763 Mil.
Total Current Liabilities was $2,443 Mil.
Long-Term Debt was $9,569 Mil.
Net Income was 433 + 416 + 460 + 405 = $1,714 Mil.
Non Operating Income was 24 + 12 + 29 + 4 = $69 Mil.
Cash Flow from Operations was 846 + 722 + 880 + 553 = $3,001 Mil.
Accounts Receivable was $961 Mil.
Revenue was 2420 + 2518 + 2713 + 2713 = $10,364 Mil.
Gross Profit was 1698 + 1631 + 1799 + 1785 = $6,913 Mil.
Total Current Assets was $1,966 Mil.
Total Assets was $33,785 Mil.
Property, Plant and Equipment(Net PPE) was $29,135 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,066 Mil.
Selling, General & Admin. Expense(SGA) was $2,851 Mil.
Total Current Liabilities was $1,831 Mil.
Long-Term Debt was $9,398 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)
=(998 / 10043) / (961 / 10364)
=0.0993727 / 0.09272482
=1.0717

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)
=(6913 / 10364) / (6920 / 10043)
=0.66702046 / 0.68903714
=0.968

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 - (2327 + 29927) / 35145) / (1 - (1966 + 29135) / 33785)
=0.08225921 / 0.07944354
=1.0354

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
=10043 / 10364
=0.969

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))
=(1066 / (1066 + 29135)) / (1037 / (1037 + 29927))
=0.03529684 / 0.03349051
=1.0539

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)
=(2763 / 10043) / (2851 / 10364)
=0.275117 / 0.27508684
=1.0001

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)
=((9569 + 2443) / 35145) / ((9398 + 1831) / 33785)
=0.34178404 / 0.33236643
=1.0283

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
=(1714 - 69 - 3001) / 35145
=-0.0386

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.

Norfolk Southern Corp has a M-score of -2.63 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.

Norfolk Southern Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.94710.81711.17790.88231.07871.09810.90650.99670.99161.0619
GMI 1.0061.01680.94471.0011.03310.99510.99370.99920.980.9416
AQI 1.13570.70651.16180.97720.91730.95921.09170.9660.93931.0583
SGI 1.00271.13030.74751.19411.1740.98821.01861.03370.90420.9407
DEPI 0.9770.99430.98231.04781.00110.99161.03411.00230.94691.0531
SGAI 0.79460.93051.19680.94450.93541.00720.99570.93361.11121.0017
LVGI 0.96461.03680.98170.99131.03861.08770.99580.93081.06011.0017
TATA -0.0351-0.0422-0.0348-0.0486-0.0515-0.0477-0.0431-0.0304-0.0424-0.0409
M-score -2.59-2.84-2.70-2.63-2.51-2.67-2.71-2.58-2.85-2.67

Norfolk Southern Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.99670.90580.96241.07110.99161.03351.03230.95351.06191.0717
GMI 0.99920.98690.98770.98520.980.96620.9580.94920.94160.968
AQI 0.9661.0080.98320.950.93930.91970.9310.96981.05831.0354
SGI 1.03371.02730.9770.93360.90420.90110.90440.91280.94070.969
DEPI 1.00231.0051.01220.99010.94690.94850.94740.98151.05311.0539
SGAI 0.93360.96621.02281.06341.11121.07621.04761.0431.00171.0001
LVGI 0.93080.93570.9841.0141.06011.03431.01941.01311.00171.0283
TATA -0.0304-0.0337-0.0377-0.0349-0.0424-0.0477-0.0381-0.0423-0.0409-0.0386
M-score -2.58-2.68-2.72-2.68-2.85-2.84-2.78-2.85-2.67-2.63
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