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GuruFocus has detected 6 Warning Signs with Conagra Brands Inc $CAG.
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Conagra Brands Inc (NYSE:CAG)
Beneish M-Score
-3.04 (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.

Conagra Brands Inc has a M-score of -3.04 suggests that the company is not a manipulator.

CAG' s Beneish M-Score Range Over the Past 10 Years
Min: -3.74   Max: -1.26
Current: -3.04

-3.74
-1.26

During the past 13 years, the highest Beneish M-Score of Conagra Brands Inc was -1.26. The lowest was -3.74. And the median was -2.69.


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 Conagra Brands 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 * 0.8326+0.528 * 0.9274+0.404 * 0.9511+0.892 * 0.9393+0.115 * 0.6167
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2782+4.679 * -0.0671-0.327 * 0.6706
=-3.04

* 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 $700 Mil.
Revenue was 2088.4 + 2667.5 + 2827.5 + 2924.1 = $10,508 Mil.
Gross Profit was 647.5 + 724.1 + 760.9 + 800.4 = $2,933 Mil.
Total Current Assets was $3,345 Mil.
Total Assets was $11,425 Mil.
Property, Plant and Equipment(Net PPE) was $1,669 Mil.
Depreciation, Depletion and Amortization(DDA) was $366 Mil.
Selling, General & Admin. Expense(SGA) was $1,979 Mil.
Total Current Liabilities was $1,745 Mil.
Long-Term Debt was $3,214 Mil.
Net Income was 122.1 + 186.2 + 117.6 + 204.6 = $631 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 216.3 + 325.9 + 512.3 + 343 = $1,398 Mil.
Accounts Receivable was $894 Mil.
Revenue was 2358.8 + 2794.9 + 3125.5 + 2907.3 = $11,187 Mil.
Gross Profit was 668 + 701.1 + 806.6 + 720 = $2,896 Mil.
Total Current Assets was $3,913 Mil.
Total Assets was $15,995 Mil.
Property, Plant and Equipment(Net PPE) was $2,646 Mil.
Depreciation, Depletion and Amortization(DDA) was $330 Mil.
Selling, General & Admin. Expense(SGA) was $1,648 Mil.
Total Current Liabilities was $3,954 Mil.
Long-Term Debt was $6,400 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)
=(699.5 / 10507.5) / (894.4 / 11186.5)
=0.0665715 / 0.07995352
=0.8326

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)
=(2895.7 / 11186.5) / (2932.9 / 10507.5)
=0.25885666 / 0.27912443
=0.9274

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 - (3345 + 1669.3) / 11425) / (1 - (3912.5 + 2645.9) / 15994.6)
=0.5611116 / 0.58996161
=0.9511

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
=10507.5 / 11186.5
=0.9393

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))
=(330.2 / (330.2 + 2645.9)) / (366.2 / (366.2 + 1669.3))
=0.11095057 / 0.17990666
=0.6167

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)
=(1978.7 / 10507.5) / (1648.1 / 11186.5)
=0.18831311 / 0.14732937
=1.2782

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)
=((3214.3 + 1745.4) / 11425) / ((6400.4 + 3953.6) / 15994.6)
=0.43410941 / 0.64734348
=0.6706

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
=(630.5 - 0 - 1397.5) / 11425
=-0.0671

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.

Conagra Brands Inc has a M-score of -3.04 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.

Conagra Brands Inc Annual Data

May07May08May09May10May11May12May13May14May15May16
DSRI 0.67670.99040.78921.16330.96981.01161.36920.94120.69241.1607
GMI 0.96951.08941.04840.87871.08721.11610.84041.01031.02650.9075
AQI 0.95190.95771.24990.9430.9621.12941.2550.9861.08640.8237
SGI 1.02731.0981.07460.96691.03091.07631.01040.87891.00830.9754
DEPI 0.88621.23780.99320.96890.93010.99931.18871.1280.70661.0373
SGAI 0.93730.90570.8881.11760.79921.22741.03250.97970.86151.4659
LVGI 1.00810.99810.8830.98710.97671.01461.35540.97670.99440.9513
TATA -0.01510.05760.075-0.0636-0.0469-0.051-0.0313-0.0655-0.0994-0.1407
M-score -2.86-2.06-2.07-2.76-2.63-2.57-2.36-2.92-3.18-3.19

Conagra Brands Inc Quarterly Data

Aug14Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16
DSRI 1.05851.16711.26260.66510.67950.71990.70551.34391.21810.8326
GMI 0.96890.94280.92961.04161.01790.94840.94420.86410.87630.9274
AQI 1.04861.03520.98021.08640.96470.97920.91690.82370.87140.9511
SGI 0.81910.72730.65241.04991.14061.03441.14620.84240.83050.9393
DEPI 1.36761.67422.25520.70660.63040.61920.44471.03731.02850.6167
SGAI 0.93651.11731.16590.99881.00570.87830.94581.36461.29711.2782
LVGI 0.93060.94431.01350.99441.14771.140.95780.95130.82870.6706
TATA -0.0514-0.0513-0.119-0.0994-0.2039-0.1975-0.1532-0.1407-0.0605-0.0671
M-score -2.75-2.75-3.04-3.18-3.70-3.74-3.44-3.15-2.82-3.04
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