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GuruFocus has detected 4 Warning Signs with Conn's Inc $CONN.
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Conn's Inc (NAS:CONN)
Beneish M-Score
-1.99 (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.

Conn's Inc has a M-score of -1.99 signals that the company is a manipulator.

CONN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.98   Max: 9
Current: -1.99

-3.98
9

During the past 13 years, the highest Beneish M-Score of Conn's Inc was 9.00. The lowest was -3.98. And the median was -1.24.


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 Conn's 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 * 1.0517+0.528 * 1.0118+0.404 * 1.0895+0.892 * 1.0238+0.115 * 0.9727
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0909+4.679 * 0.0899-0.327 * 1.0701
=-1.99

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

This Year (Oct16) TTM:Last Year (Oct15) TTM:
Accounts Receivable was $761 Mil.
Revenue was 376.773 + 398.157 + 389.113 + 456.819 = $1,621 Mil.
Gross Profit was 184.399 + 189.288 + 184.647 + 216.188 = $775 Mil.
Total Current Assets was $1,180 Mil.
Total Assets was $2,081 Mil.
Property, Plant and Equipment(Net PPE) was $172 Mil.
Depreciation, Depletion and Amortization(DDA) was $28 Mil.
Selling, General & Admin. Expense(SGA) was $479 Mil.
Total Current Liabilities was $193 Mil.
Long-Term Debt was $1,259 Mil.
Net Income was -3.815 + -11.924 + -9.749 + 1.061 = $-24 Mil.
Non Operating Income was -68.74 + -66.158 + -70.571 + -80.289 = $-286 Mil.
Cash Flow from Operations was 51.113 + 23.245 + 108.653 + -108.828 = $74 Mil.
Accounts Receivable was $707 Mil.
Revenue was 395.233 + 396.05 + 365.076 + 426.748 = $1,583 Mil.
Gross Profit was 192.332 + 193.589 + 177.943 + 201.535 = $765 Mil.
Total Current Assets was $1,278 Mil.
Total Assets was $2,089 Mil.
Property, Plant and Equipment(Net PPE) was $139 Mil.
Depreciation, Depletion and Amortization(DDA) was $22 Mil.
Selling, General & Admin. Expense(SGA) was $429 Mil.
Total Current Liabilities was $204 Mil.
Long-Term Debt was $1,159 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)
=(761.217 / 1620.862) / (706.934 / 1583.107)
=0.46963714 / 0.44654846
=1.0517

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)
=(765.399 / 1583.107) / (774.522 / 1620.862)
=0.48347901 / 0.47784574
=1.0118

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 - (1179.538 + 171.753) / 2080.634) / (1 - (1277.63 + 139.163) / 2088.843)
=0.35053883 / 0.32173313
=1.0895

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
=1620.862 / 1583.107
=1.0238

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))
=(21.591 / (21.591 + 139.163)) / (27.515 / (27.515 + 171.753))
=0.13431081 / 0.13808037
=0.9727

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)
=(478.77 / 1620.862) / (428.661 / 1583.107)
=0.29537987 / 0.27077197
=1.0909

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)
=((1259.009 + 193.084) / 2080.634) / ((1158.746 + 203.639) / 2088.843)
=0.69790891 / 0.65221991
=1.0701

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
=(-24.427 - -285.758 - 74.183) / 2080.634
=0.0899

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.

Conn's Inc has a M-score of -1.99 signals that the company is likely to 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.

Conn's Inc Annual Data

Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16
DSRI 1.08740.149310.23856.51071.00561.07350.97511.01060.98031.2016
GMI 1.0311.01510.96890.98140.97080.96780.94470.93470.99010.9861
AQI 1.01621.01983.27973.41190.96731.03420.98570.99621.02810.9507
SGI 1.08491.08341.16310.92550.91170.97961.09181.381.24411.0862
DEPI 0.98731.02410.98620.91260.67481.08221.09841.69831.0081.0224
SGAI 0.99581.00640.88721.10371.0271.04140.85470.96031.04161.033
LVGI 0.8920.80851.68961.8240.91090.93890.85681.1261.08881.2355
TATA 0.23860.35920.41310.10930.10280.10410.24940.38960.31150.2454
M-score -1.15-1.438.793.70-2.11-1.92-1.21-0.30-0.85-1.18

Conn's Inc Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
DSRI 0.97670.88030.98030.91670.94521.05961.20161.14981.13141.0517
GMI 0.99791.03120.99010.97820.96930.95150.98610.9961.00781.0118
AQI 0.9880.95051.02811.03931.00630.94680.95070.93780.95851.0895
SGI 1.39031.31081.24411.18521.14521.11521.08621.08081.05221.0238
DEPI 1.55831.55311.0081.0111.04390.82781.02240.99430.93810.9727
SGAI 0.9180.88691.03311.0551.07231.12341.04051.06661.10341.0909
LVGI 1.15591.10051.08881.03031.0571.18061.23551.27391.22691.0701
TATA 0.38490.35070.31150.29950.27090.2210.24540.21190.14860.0899
M-score -0.33-0.63-0.85-1.00-1.17-1.44-1.18-1.41-1.73-1.99
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