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GuruFocus has detected 2 Warning Signs with AutoZone Inc $AZO.
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AutoZone Inc (NYSE:AZO)
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.

AutoZone Inc has a M-score of -2.63 suggests that the company is not a manipulator.

AZO' s Beneish M-Score Range Over the Past 10 Years
Min: -3.33   Max: 0.98
Current: -2.63

-3.33
0.98

During the past 13 years, the highest Beneish M-Score of AutoZone Inc was 0.98. The lowest was -3.33. 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 AutoZone 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 * 1.0501+0.528 * 0.9925+0.404 * 0.9351+0.892 * 1.0392+0.115 * 0.9658
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0059+4.679 * -0.043-0.327 * 0.9713
=-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 (Nov16) TTM:Last Year (Nov15) TTM:
Accounts Receivable was $271 Mil.
Revenue was 2467.845 + 3398.769 + 2593.672 + 2257.192 = $10,717 Mil.
Gross Profit was 1301.542 + 1794.748 + 1370.458 + 1190.596 = $5,657 Mil.
Total Current Assets was $4,369 Mil.
Total Assets was $8,743 Mil.
Property, Plant and Equipment(Net PPE) was $3,751 Mil.
Depreciation, Depletion and Amortization(DDA) was $303 Mil.
Selling, General & Admin. Expense(SGA) was $3,576 Mil.
Total Current Liabilities was $4,850 Mil.
Long-Term Debt was $4,997 Mil.
Net Income was 278.125 + 426.768 + 327.515 + 228.613 = $1,261 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 406.5 + 530.429 + 516.347 + 183.55 = $1,637 Mil.
Accounts Receivable was $248 Mil.
Revenue was 2386.043 + 3290.404 + 2493.021 + 2143.651 = $10,313 Mil.
Gross Profit was 1252.934 + 1727.548 + 1302.789 + 1120.033 = $5,403 Mil.
Total Current Assets was $4,054 Mil.
Total Assets was $8,218 Mil.
Property, Plant and Equipment(Net PPE) was $3,537 Mil.
Depreciation, Depletion and Amortization(DDA) was $275 Mil.
Selling, General & Admin. Expense(SGA) was $3,421 Mil.
Total Current Liabilities was $4,775 Mil.
Long-Term Debt was $4,754 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)
=(270.768 / 10717.478) / (248.12 / 10313.119)
=0.02526415 / 0.02405868
=1.0501

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)
=(5403.304 / 10313.119) / (5657.344 / 10717.478)
=0.5239253 / 0.5278615
=0.9925

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 - (4368.686 + 3750.511) / 8742.544) / (1 - (4053.871 + 3537.055) / 8217.528)
=0.07130041 / 0.07625188
=0.9351

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
=10717.478 / 10313.119
=1.0392

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))
=(275.157 / (275.157 + 3537.055)) / (302.926 / (302.926 + 3750.511))
=0.07217778 / 0.07473312
=0.9658

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)
=(3576.042 / 10717.478) / (3420.819 / 10313.119)
=0.33366451 / 0.33169587
=1.0059

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)
=((4997.446 + 4850.219) / 8742.544) / ((4754.101 + 4775.241) / 8217.528)
=1.12640726 / 1.15963609
=0.9713

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
=(1261.021 - 0 - 1636.826) / 8742.544
=-0.043

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.

AutoZone Inc 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.

AutoZone Inc Annual Data

Aug07Aug08Aug09Aug10Aug11Aug12Aug13Aug14Aug15Aug16
DSRI 0.71831.12541.69920.92071.01991.07621.00041.131.14761.1117
GMI 0.99470.99130.99970.99410.9880.99060.99390.99510.9960.9916
AQI 0.9430.97741.04341.04360.88120.98831.14541.02660.95640.943
SGI 1.03721.05721.04511.08011.09651.06581.06321.03581.07511.044
DEPI 0.93380.99940.96830.97451.06660.99181.00230.97660.98680.9689
SGAI 1.00431.00940.99990.98871.00061.00210.99581.00991.01081.0073
LVGI 1.01671.03251.12621.04461.07731.02361.00880.97560.9950.9701
TATA -0.0519-0.0532-0.0502-0.0822-0.0754-0.0469-0.0578-0.0362-0.045-0.0391
M-score -2.99-2.59-2.06-2.87-2.80-2.59-2.64-2.49-2.51-2.54

AutoZone Inc Quarterly Data

Aug14Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16
DSRI 1.131.08350.98591.06361.14761.18641.41311.31221.11171.0501
GMI 0.99510.99440.99480.99430.9960.99490.99350.99210.99160.9925
AQI 1.02661.0891.02291.01860.95640.90330.88120.89650.9430.9351
SGI 1.03581.04241.04371.04471.07511.06961.06451.05841.0441.0392
DEPI 0.97660.97970.99520.99710.98680.98330.95730.95770.96890.9658
SGAI 1.00991.01361.01251.01051.01081.00861.00931.01241.00731.0059
LVGI 0.97560.97640.95860.96580.9950.99950.99230.98760.97010.9713
TATA -0.0257-0.015-0.016-0.0202-0.0359-0.0386-0.0457-0.0422-0.0391-0.043
M-score -2.44-2.40-2.51-2.46-2.47-2.47-2.31-2.39-2.54-2.63
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