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GuruFocus has detected 2 Warning Signs with Cerner Corp $CERN.
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Cerner Corp (NAS:CERN)
Beneish M-Score
-2.99 (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.

Cerner Corp has a M-score of -2.99 suggests that the company is not a manipulator.

CERN' s Beneish M-Score Range Over the Past 10 Years
Min: -4.33   Max: -1.75
Current: -2.99

-4.33
-1.75

During the past 13 years, the highest Beneish M-Score of Cerner Corp was -1.75. The lowest was -4.33. And the median was -2.78.


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 Cerner 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 * 0.8492+0.528 * 0.9914+0.404 * 1.0014+0.892 * 1.0839+0.115 * 1.0472
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0051+4.679 * -0.0935-0.327 * 1.0187
=-2.99

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

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $916 Mil.
Revenue was 1257.819 + 1184.557 + 1215.962 + 1138.135 = $4,796 Mil.
Gross Profit was 1042.822 + 1001.587 + 1010.406 + 962.542 = $4,017 Mil.
Total Current Assets was $1,619 Mil.
Total Assets was $5,630 Mil.
Property, Plant and Equipment(Net PPE) was $1,553 Mil.
Depreciation, Depletion and Amortization(DDA) was $504 Mil.
Selling, General & Admin. Expense(SGA) was $2,464 Mil.
Total Current Liabilities was $845 Mil.
Long-Term Debt was $538 Mil.
Net Income was 149.691 + 169.979 + 166.454 + 150.36 = $636 Mil.
Non Operating Income was 3.687 + -0.417 + 2.47 + 1.681 = $7 Mil.
Cash Flow from Operations was 333.238 + 240.349 + 254.942 + 327.083 = $1,156 Mil.
Accounts Receivable was $995 Mil.
Revenue was 1175.294 + 1127.887 + 1125.997 + 996.089 = $4,425 Mil.
Gross Profit was 976.078 + 937.304 + 933.675 + 827.429 = $3,674 Mil.
Total Current Assets was $1,828 Mil.
Total Assets was $5,562 Mil.
Property, Plant and Equipment(Net PPE) was $1,309 Mil.
Depreciation, Depletion and Amortization(DDA) was $452 Mil.
Selling, General & Admin. Expense(SGA) was $2,262 Mil.
Total Current Liabilities was $778 Mil.
Long-Term Debt was $563 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)
=(915.815 / 4796.473) / (994.95 / 4425.267)
=0.19093509 / 0.22483389
=0.8492

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)
=(3674.486 / 4425.267) / (4017.357 / 4796.473)
=0.83034221 / 0.83756481
=0.9914

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 - (1619.361 + 1552.524) / 5629.963) / (1 - (1827.833 + 1309.214) / 5561.984)
=0.43660642 / 0.43598417
=1.0014

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
=4796.473 / 4425.267
=1.0839

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))
=(452.225 / (452.225 + 1309.214)) / (504.236 / (504.236 + 1552.524))
=0.25673611 / 0.24516035
=1.0472

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)
=(2464.38 / 4796.473) / (2262.024 / 4425.267)
=0.51379003 / 0.51116102
=1.0051

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)
=((537.552 + 845.401) / 5629.963) / ((563.353 + 777.866) / 5561.984)
=0.24564158 / 0.24114039
=1.0187

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
=(636.484 - 7.421 - 1155.612) / 5629.963
=-0.0935

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.

Cerner Corp has a M-score of -2.99 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.

Cerner Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.9811.08740.98640.93390.83190.9590.91380.96271.24270.8492
GMI 0.96710.99070.98981.0061.03421.03590.93761.0010.99040.9914
AQI 0.93371.18470.80131.39911.04741.0791.03810.73681.57081.0014
SGI 1.10291.10270.99751.10671.19081.20981.0921.1691.30051.0839
DEPI 1.04430.95210.96080.97140.92191.07851.1261.01210.96011.0472
SGAI 1.02930.9821.00130.98010.94950.96451.13550.94891.06781.0051
LVGI 0.82550.87310.87740.73091.13511.10450.94860.83851.5671.0187
TATA -0.0864-0.0492-0.0718-0.0902-0.0799-0.0852-0.0755-0.0707-0.0734-0.0916
M-score -2.80-2.43-2.88-2.62-2.85-2.70-2.84-2.74-2.31-2.98

Cerner Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.0120.96271.41891.35051.3681.24270.79820.82310.8320.8492
GMI 0.9871.0011.00840.99790.99780.99040.98530.99070.98620.9914
AQI 0.74310.73681.27931.26951.58861.57081.02280.93430.90721.0014
SGI 1.15791.1691.19851.23061.27631.30051.26381.19781.12881.0839
DEPI 1.03861.01211.05771.00930.95370.96010.90390.97311.03081.0472
SGAI 1.08330.95080.95450.99470.99951.06561.0510.99970.99861.0051
LVGI 0.95650.83851.48271.3611.4821.5670.93770.96040.89681.0187
TATA -0.077-0.0734-0.0742-0.0488-0.0542-0.0734-0.0864-0.1006-0.0886-0.0935
M-score -2.79-2.75-2.29-2.19-2.07-2.31-2.83-2.96-2.94-2.99
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