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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
-3.06 (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 -3.06 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: -3.06

-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 * 0.8291+0.528 * 0.9227+0.404 * 1.1289+0.892 * 0.8537+0.115 * 0.8345
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2118+4.679 * -0.0717-0.327 * 0.7362
=-3.06

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Feb17) TTM:Last Year (Feb16) TTM:
Accounts Receivable was $601 Mil.
Revenue was 1981.2 + 2088.4 + 2667.5 + 2827.5 = $9,565 Mil.
Gross Profit was 621 + 647.5 + 724.1 + 760.9 = $2,754 Mil.
Total Current Assets was $2,539 Mil.
Total Assets was $10,499 Mil.
Property, Plant and Equipment(Net PPE) was $1,656 Mil.
Depreciation, Depletion and Amortization(DDA) was $292 Mil.
Selling, General & Admin. Expense(SGA) was $1,839 Mil.
Total Current Liabilities was $1,565 Mil.
Long-Term Debt was $2,842 Mil.
Net Income was 179.7 + 122.1 + 186.2 + 117.6 = $606 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 304.3 + 216.3 + 325.9 + 512.3 = $1,359 Mil.
Accounts Receivable was $850 Mil.
Revenue was 2924.1 + 2358.8 + 2794.9 + 3125.5 = $11,203 Mil.
Gross Profit was 800.4 + 668 + 701.1 + 806.6 = $2,976 Mil.
Total Current Assets was $3,528 Mil.
Total Assets was $13,187 Mil.
Property, Plant and Equipment(Net PPE) was $2,646 Mil.
Depreciation, Depletion and Amortization(DDA) was $378 Mil.
Selling, General & Admin. Expense(SGA) was $1,777 Mil.
Total Current Liabilities was $2,616 Mil.
Long-Term Debt was $4,903 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)
=(601.4 / 9564.6) / (849.6 / 11203.3)
=0.06287769 / 0.0758348
=0.8291

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)
=(2976.1 / 11203.3) / (2753.5 / 9564.6)
=0.26564494 / 0.28788449
=0.9227

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 - (2539.1 + 1655.8) / 10499) / (1 - (3527.5 + 2645.7) / 13187.2)
=0.60044766 / 0.5318794
=1.1289

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
=9564.6 / 11203.3
=0.8537

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))
=(378.3 / (378.3 + 2645.7)) / (292 / (292 + 1655.8))
=0.12509921 / 0.14991272
=0.8345

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)
=(1838.8 / 9564.6) / (1777.4 / 11203.3)
=0.19225059 / 0.15864968
=1.2118

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)
=((2841.7 + 1564.9) / 10499) / ((4902.7 + 2615.6) / 13187.2)
=0.41971616 / 0.57012103
=0.7362

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
=(605.6 - 0 - 1358.8) / 10499
=-0.0717

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 -3.06 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

Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17
DSRI 1.16711.26260.66510.67950.71990.70551.34391.21810.83260.8291
GMI 0.94280.92961.04161.01790.94840.94420.86410.87630.92740.9227
AQI 1.03520.98021.08640.96470.97920.91690.82370.87140.95111.1289
SGI 0.72730.65241.04991.14061.03441.14620.84240.83050.93930.8537
DEPI 1.67422.25520.70660.63040.61920.44471.03731.02850.61670.8345
SGAI 1.11731.16590.99881.00570.87830.94581.36461.29711.27821.2118
LVGI 0.94431.01350.99441.14771.140.95780.95130.82870.67060.7362
TATA -0.0513-0.119-0.0994-0.2039-0.1975-0.1532-0.1407-0.0605-0.0671-0.0717
M-score -2.75-3.04-3.18-3.70-3.74-3.44-3.15-2.82-3.04-3.06
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