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GuruFocus has detected 3 Warning Signs with Cato Corp $CATO.
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Cato Corp (NYSE:CATO)
Beneish M-Score
-2.76 (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.

Cato Corp has a M-score of -2.76 suggests that the company is not a manipulator.

CATO' s Beneish M-Score Range Over the Past 10 Years
Min: -3.47   Max: -1.97
Current: -2.76

-3.47
-1.97

During the past 13 years, the highest Beneish M-Score of Cato Corp was -1.97. The lowest was -3.47. And the median was -2.76.


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 Cato 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 * 0.8759+0.528 * 1.0529+0.404 * 1.1965+0.892 * 0.9461+0.115 * 0.9346
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.111+4.679 * -0.0411-0.327 * 1.015
=-2.76

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

This Year (Jan17) TTM:Last Year (Jan16) TTM:
Accounts Receivable was $30.3 Mil.
Revenue was 220.447 + 209.262 + 238.887 + 287.973 = $956.6 Mil.
Gross Profit was 65.12 + 75.635 + 89.828 + 124 = $354.6 Mil.
Total Current Assets was $443.8 Mil.
Total Assets was $606.3 Mil.
Property, Plant and Equipment(Net PPE) was $126.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $22.7 Mil.
Selling, General & Admin. Expense(SGA) was $289.8 Mil.
Total Current Liabilities was $171.9 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -12.809 + 8.26 + 15.887 + 35.874 = $47.2 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 25.875 + -8.753 + 18.847 + 36.16 = $72.1 Mil.
Accounts Receivable was $36.6 Mil.
Revenue was 250.456 + 225.467 + 251.269 + 283.899 = $1,011.1 Mil.
Gross Profit was 91.242 + 85.204 + 96.786 + 121.379 = $394.6 Mil.
Total Current Assets was $472.1 Mil.
Total Assets was $642.3 Mil.
Property, Plant and Equipment(Net PPE) was $138.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $23.0 Mil.
Selling, General & Admin. Expense(SGA) was $275.7 Mil.
Total Current Liabilities was $179.4 Mil.
Long-Term Debt was $0.0 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)
=(30.336 / 956.569) / (36.61 / 1011.091)
=0.03171334 / 0.03620841
=0.8759

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)
=(394.611 / 1011.091) / (354.583 / 956.569)
=0.39028238 / 0.37068209
=1.0529

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 - (443.808 + 126.386) / 606.324) / (1 - (472.052 + 138.303) / 642.344)
=0.0595886 / 0.04980042
=1.1965

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
=956.569 / 1011.091
=0.9461

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))
=(22.963 / (22.963 + 138.303)) / (22.716 / (22.716 + 126.386))
=0.14239207 / 0.15235208
=0.9346

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)
=(289.795 / 956.569) / (275.713 / 1011.091)
=0.30295253 / 0.27268861
=1.111

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)
=((0 + 171.912) / 606.324) / ((0 + 179.437) / 642.344)
=0.28353158 / 0.2793472
=1.015

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
=(47.212 - 0 - 72.129) / 606.324
=-0.0411

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.

Cato Corp has a M-score of -2.76 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.

Cato Corp Annual Data

Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16Jan17
DSRI 1.01960.96190.88270.94531.07580.91771.00580.9750.87110.8759
GMI 1.06880.93950.91790.96081.0191.00011.01170.96841.0031.0529
AQI 1.07560.79031.81270.91390.83441.30360.98322.02391.62461.1965
SGI 0.96641.01331.03061.0461.00731.01350.97461.07271.02450.9461
DEPI 0.91750.93960.9280.97621.12881.10941.07010.95590.9840.9346
SGAI 1.02861.06521.04630.97660.94611.00871.03261.04740.97421.111
LVGI 1.24350.97821.01160.9320.87271.05180.99031.07420.87631.015
TATA -0.1054-0.0871-0.0809-0.0433-0.0339-0.0374-0.068-0.0972-0.045-0.0411
M-score -3.01-3.04-2.67-2.72-2.55-2.60-2.81-2.53-2.49-2.76

Cato Corp Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 0.95750.9750.88540.89280.90780.87110.94870.89790.8790.8759
GMI 0.97660.96840.97020.99090.98981.0031.00391.00241.01611.0529
AQI 1.40042.02391.94342.11172.20591.62461.38291.23431.23621.1965
SGI 1.02911.07271.05461.04411.03771.02451.02951.01160.98580.9461
DEPI 1.02460.95590.93790.92690.92790.9840.96240.94771.0010.9346
SGAI 1.07111.04741.03551.00420.99660.97420.97440.99761.00221.111
LVGI 1.10891.07420.96610.96490.95390.87630.8460.85320.8861.015
TATA -0.0947-0.0972-0.0527-0.0469-0.0358-0.045-0.047-0.0354-0.0201-0.0411
M-score -2.83-2.53-2.42-2.31-2.21-2.49-2.51-2.59-2.56-2.76
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