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GuruFocus has detected 4 Warning Signs with CarMax Inc $KMX.
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CarMax Inc (NYSE:KMX)
Beneish M-Score
-2.43 (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.

CarMax Inc has a M-score of -2.43 suggests that the company is not a manipulator.

KMX' s Beneish M-Score Range Over the Past 10 Years
Min: -3.45   Max: 4.25
Current: -2.43

-3.45
4.25

During the past 13 years, the highest Beneish M-Score of CarMax Inc was 4.25. The lowest was -3.45. And the median was -2.34.


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 CarMax 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 * 1.0009+0.528 * 0.9866+0.404 * 1.0058+0.892 * 1.0383+0.115 * 0.9391
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 2.0931+4.679 * 0.0467-0.327 * 1.0158
=-2.43

* 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 $92 Mil.
Revenue was 3701.524 + 3997.248 + 4126.386 + 3705.805 = $15,531 Mil.
Gross Profit was 503.135 + 545.362 + 572.637 + 489.265 = $2,110 Mil.
Total Current Assets was $2,684 Mil.
Total Assets was $15,760 Mil.
Property, Plant and Equipment(Net PPE) was $2,449 Mil.
Depreciation, Depletion and Amortization(DDA) was $163 Mil.
Selling, General & Admin. Expense(SGA) was $2,143 Mil.
Total Current Liabilities was $1,028 Mil.
Long-Term Debt was $11,485 Mil.
Net Income was 136.645 + 162.362 + 175.36 + 141.027 = $615 Mil.
Non Operating Income was -1.027 + 0.435 + 0.616 + -9.768 = $-10 Mil.
Cash Flow from Operations was -303.285 + -125.205 + 85.364 + 232.686 = $-110 Mil.
Accounts Receivable was $89 Mil.
Revenue was 3544.069 + 3884.913 + 4014.888 + 3514.092 = $14,958 Mil.
Gross Profit was 464.331 + 521.37 + 543.794 + 475.837 = $2,005 Mil.
Total Current Assets was $2,635 Mil.
Total Assets was $14,381 Mil.
Property, Plant and Equipment(Net PPE) was $2,106 Mil.
Depreciation, Depletion and Amortization(DDA) was $131 Mil.
Selling, General & Admin. Expense(SGA) was $986 Mil.
Total Current Liabilities was $924 Mil.
Long-Term Debt was $10,316 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)
=(92.003 / 15530.963) / (88.53 / 14957.962)
=0.00592384 / 0.00591859
=1.0009

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)
=(2005.332 / 14957.962) / (2110.399 / 15530.963)
=0.13406452 / 0.13588333
=0.9866

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 - (2684.278 + 2449.343) / 15760.067) / (1 - (2634.883 + 2105.807) / 14381.165)
=0.67426401 / 0.67035424
=1.0058

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
=15530.963 / 14957.962
=1.0383

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))
=(130.683 / (130.683 + 2105.807)) / (162.51 / (162.51 + 2449.343))
=0.05843219 / 0.06222019
=0.9391

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)
=(2143.101 / 15530.963) / (986.116 / 14957.962)
=0.13798893 / 0.06592583
=2.0931

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)
=((11484.527 + 1027.717) / 15760.067) / ((10315.946 + 923.554) / 14381.165)
=0.79392074 / 0.78154308
=1.0158

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
=(615.394 - -9.744 - -110.44) / 15760.067
=0.0467

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.

CarMax Inc has a M-score of -2.43 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.

CarMax Inc Annual Data

Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14Feb15Feb16
DSRI 0.78150.93361.21831.22341.00110.64840.97090.75771.51820.9041
GMI 0.97110.99450.94210.94381.01471.05191.03181.01880.99120.9927
AQI 0.97141.10471.32070.646115.8510.94650.99651.01791.04671.0264
SGI 1.19261.09830.85051.07121.20151.11451.09591.1471.13481.0617
DEPI 1.00810.98170.93010.89950.81.25940.9731.07640.99720.9747
SGAI 0.99821.00691.20860.86620.89340.960510.97690.95941.0124
LVGI 0.87721.0620.91450.70243.27111.02391.02361.03671.05981.0536
TATA -0.03760.0068-0.10250.09050.05610.05710.12250.09460.11890.0542
M-score -2.67-2.41-2.81-1.853.22-2.40-1.84-2.11-1.33-2.28

CarMax Inc Quarterly Data

Aug14Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16
DSRI 1.14111.15521.51820.9490.83550.92830.90410.9420.90411.0009
GMI 1.0291.02080.99120.98530.96550.96850.99270.98960.99540.9866
AQI 1.03631.03761.04671.03571.03111.02051.02641.02890.99441.0058
SGI 1.11511.12211.13481.11681.10861.08151.06171.05011.03741.0383
DEPI 1.02971.00680.99720.97921.00120.99280.97470.96890.93050.9391
SGAI 0.97590.97210.95940.8840.72990.74421.27011.52012.1212.0931
LVGI 1.0331.06611.05981.04531.05411.0591.05361.05321.04531.0158
TATA 0.10620.11370.11890.09170.08940.08310.05420.05480.04650.0467
M-score -1.72-1.69-1.33-1.98-2.09-2.07-2.32-2.34-2.54-2.43
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