Antero Resources 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 Antero Resources 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 * 2.2136 | + | 0.528 * -10.4737 | + | 0.404 * 0.3035 | + | 0.892 * 0.848 | + | 0.115 * 0.9999 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.8129 | + | 4.679 * -0.0673 | - | 0.327 * 1.1034 |
| = | -8.16 |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
| This Year (Mar20) TTM: | Last Year (Mar19) TTM: |
Accounts Receivable was $92 Mil.
Revenue was 704.401 + 872.984 + 849.967 + 906.397 = $3,334 Mil.
Gross Profit was -135.243 + 73.863 + -60.187 + 25.436 = $-96 Mil.
Total Current Assets was $1,120 Mil.
Total Assets was $14,526 Mil.
Property, Plant and Equipment(Net PPE) was $12,809 Mil.
Depreciation, Depletion and Amortization(DDA) was $878 Mil.
Selling, General, & Admin. Expense(SGA) was $622 Mil.
Total Current Liabilities was $972 Mil.
Long-Term Debt & Capital Lease Obligation was $6,229 Mil.
Net Income was -338.81 + -482.196 + -878.864 + 42.168 = $-1,658 Mil.
Non Operating Income was -181.513 + -527.025 + -946.34 + 210.062 = $-1,445 Mil.
Cash Flow from Operations was 200.677 + 147.94 + 198.41 + 218.104 = $765 Mil.
|
Accounts Receivable was $49 Mil.
Revenue was 1019.003 + 1218.621 + 925.113 + 768.398 = $3,931 Mil.
Gross Profit was 276.863 + 455.266 + 288.636 + 166.507 = $1,187 Mil.
Total Current Assets was $545 Mil.
Total Assets was $17,289 Mil.
Property, Plant and Equipment(Net PPE) was $14,405 Mil.
(DDA) was $988 Mil.
Selling, General, & Admin. Expense(SGA) was $902 Mil.
Total Current Liabilities was $1,267 Mil.
Long-Term Debt & Capital Lease Obligation was $6,501 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) |
| = | (91.944 / 3333.749) | / | (48.979 / 3931.135) |
| = | 0.02757976 | / | 0.01245925 |
| | = | 2.2136 |
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) |
| = | (1187.272 / 3931.135) | / | (-96.131 / 3333.749) |
| = | 0.30201761 | / | -0.0288357 |
| | = | -10.4737 |
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 - (1120.021 + 12809.279) / 14525.789) | / | (1 - (544.896 + 14404.865) / 17288.73) |
| = | 0.04106414 | / | 0.13528865 |
| | = | 0.3035 |
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 |
| = | 3333.749 | / | 3931.135 |
| | = | 0.848 |
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)) |
| = | (987.527 / (987.527 + 14404.865)) | / | (878.233 / (878.233 + 12809.279)) |
| = | 0.06415683 | / | 0.06416309 |
| | = | 0.9999 |
6. SGAI = Sales, General and Administrative expenses Index
The ratio of c 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) |
| = | (621.718 / 3333.749) | / | (901.916 / 3931.135) |
| = | 0.18649214 | / | 0.22942891 |
| | = | 0.8129 |
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) |
| = | ((6228.726 + 971.874) / 14525.789) | / | ((6500.532 + 1266.781) / 17288.73) |
| = | 0.49571145 | / | 0.4492703 |
| | = | 1.1034 |
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 |
| = | (-1657.702 - -1444.816 | - | 765.131) | / | 14525.789 |
| | = | -0.0673 |
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.
Antero Resources has a M-score of -8.16 suggests that the company will not be a manipulator.
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