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GuruFocus has detected 6 Warning Signs with Darden Restaurants Inc $DRI.
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Darden Restaurants Inc (NYSE:DRI)
Beneish M-Score
-2.72 (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.

Darden Restaurants Inc has a M-score of -2.72 suggests that the company is not a manipulator.

DRI' s Beneish M-Score Range Over the Past 10 Years
Min: -3.95   Max: 2.73
Current: -2.72

-3.95
2.73

During the past 13 years, the highest Beneish M-Score of Darden Restaurants Inc was 2.73. The lowest was -3.95. And the median was -2.79.


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 Darden Restaurants 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 * 1.0886+0.528 * 1.0054+0.404 * 1.1597+0.892 * 1.013+0.115 * 1.148
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.899+4.679 * -0.1052-0.327 * 0.8199
=-2.72

* 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 $70 Mil.
Revenue was 1642.5 + 1714.4 + 1790.2 + 1847.5 = $6,995 Mil.
Gross Profit was 321 + 371.7 + 407.9 + 432 = $1,533 Mil.
Total Current Assets was $683 Mil.
Total Assets was $4,462 Mil.
Property, Plant and Equipment(Net PPE) was $2,057 Mil.
Depreciation, Depletion and Amortization(DDA) was $268 Mil.
Selling, General & Admin. Expense(SGA) was $588 Mil.
Total Current Liabilities was $1,151 Mil.
Long-Term Debt was $441 Mil.
Net Income was 79.5 + 110.2 + 139.6 + 105.8 = $435 Mil.
Non Operating Income was 0 + -19.8 + 0 + 0 = $-20 Mil.
Cash Flow from Operations was 121.2 + 173.1 + 223.2 + 406.6 = $924 Mil.
Accounts Receivable was $63 Mil.
Revenue was 1608.8 + 1687 + 1878.3 + 1730.9 = $6,905 Mil.
Gross Profit was 324.9 + 376.3 + 431.4 + 388.6 = $1,521 Mil.
Total Current Assets was $1,384 Mil.
Total Assets was $5,182 Mil.
Property, Plant and Equipment(Net PPE) was $2,075 Mil.
Depreciation, Depletion and Amortization(DDA) was $317 Mil.
Selling, General & Admin. Expense(SGA) was $646 Mil.
Total Current Liabilities was $1,815 Mil.
Long-Term Debt was $440 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)
=(69.8 / 6994.6) / (63.3 / 6905)
=0.00997913 / 0.00916727
=1.0886

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)
=(1521.2 / 6905) / (1532.6 / 6994.6)
=0.22030413 / 0.21911189
=1.0054

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 - (683.4 + 2056.9) / 4461.9) / (1 - (1383.5 + 2074.6) / 5182.3)
=0.3858446 / 0.33270941
=1.1597

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
=6994.6 / 6905
=1.013

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))
=(316.9 / (316.9 + 2074.6)) / (268.4 / (268.4 + 2056.9))
=0.13251098 / 0.11542597
=1.148

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)
=(588 / 6994.6) / (645.7 / 6905)
=0.08406485 / 0.09351195
=0.899

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)
=((440.5 + 1151.3) / 4461.9) / ((439.5 + 1815.4) / 5182.3)
=0.35675385 / 0.43511568
=0.8199

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
=(435.1 - -19.8 - 924.1) / 4461.9
=-0.1052

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.

Darden Restaurants Inc has a M-score of -2.72 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.

Darden Restaurants Inc Annual Data

May07May08May09May10May11May12May13May14May15May16
DSRI 1.20241.25840.49011.62461.04421.53710.46871.00281.10530.9093
GMI 0.99761.04671.02520.95620.95391.03241.05561.06920.97970.9462
AQI 0.84594.82620.91540.96760.9640.96211.23540.94921.17921.3068
SGI 1.03991.19031.08920.98551.05440.71031.11151.06161.07611.0251
DEPI 0.89251.14140.94080.97091.00991.39750.96570.72160.91450.7258
SGAI 1.02041.00390.95231.04351.0291.02391.04151.00260.94060.9023
LVGI 1.0761.10070.9270.91440.99181.09761.03521.00830.76670.8035
TATA -0.1406-0.0755-0.0816-0.0931-0.0762-0.0481-0.0775-0.038-0.0275-0.0972
M-score -3.02-0.87-3.25-2.37-2.79-2.46-3.13-2.62-2.31-2.85

Darden Restaurants Inc Quarterly Data

Aug14Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16
DSRI 0.91590.61840.61081.10530.65340.88280.78250.90930.91191.0886
GMI 1.04241.04481.01250.97980.93380.9110.90990.94620.98181.0054
AQI 1.12471.18791.15621.17921.00311.1131.31911.30681.38371.1597
SGI 1.17211.29941.51871.07611.07961.0751.07431.02511.01541.013
DEPI 0.65630.57830.50950.91450.89180.64790.68220.72580.78681.148
SGAI 0.98330.97940.89440.94030.94930.88860.92260.90230.89060.899
LVGI 0.87970.83580.82520.76670.83990.89140.76430.80350.84030.8199
TATA 0.04940.02250.0141-0.0275-0.0992-0.0875-0.1177-0.0874-0.1-0.1052
M-score -2.10-2.35-2.22-2.31-3.18-2.92-3.03-2.80-2.82-2.72
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