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GuruFocus has detected 3 Warning Signs with LKQ Corp $LKQ.
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LKQ Corp (NAS:LKQ)
Beneish M-Score
-2.31 (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.

LKQ Corp has a M-score of -2.31 suggests that the company is not a manipulator.

LKQ' s Beneish M-Score Range Over the Past 10 Years
Min: -2.56   Max: -1.48
Current: -2.31

-2.56
-1.48

During the past 13 years, the highest Beneish M-Score of LKQ Corp was -1.48. The lowest was -2.56. And the median was -2.23.


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 LKQ 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 * 1.1772+0.528 * 1.0336+0.404 * 1.0224+0.892 * 1.2387+0.115 * 0.7675
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9633+4.679 * -0.0219-0.327 * 1.3381
=-2.31

* 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 $861 Mil.
Revenue was 2150.406 + 2386.83 + 2450.693 + 1921.476 = $8,909 Mil.
Gross Profit was 830.006 + 883.412 + 921.947 + 760.437 = $3,396 Mil.
Total Current Assets was $3,568 Mil.
Total Assets was $8,303 Mil.
Property, Plant and Equipment(Net PPE) was $812 Mil.
Depreciation, Depletion and Amortization(DDA) was $206 Mil.
Selling, General & Admin. Expense(SGA) was $2,371 Mil.
Total Current Liabilities was $1,211 Mil.
Long-Term Debt was $3,276 Mil.
Net Income was 86.331 + 122.688 + 140.737 + 107.732 = $457 Mil.
Non Operating Income was 8.207 + 3.279 + -1.339 + -5.419 = $5 Mil.
Cash Flow from Operations was 110.863 + 168.921 + 225.023 + 130.207 = $635 Mil.
Accounts Receivable was $590 Mil.
Revenue was 1748.919 + 1831.732 + 1838.07 + 1773.912 = $7,193 Mil.
Gross Profit was 697.327 + 712.779 + 723.944 + 699.479 = $2,834 Mil.
Total Current Assets was $2,341 Mil.
Total Assets was $5,648 Mil.
Property, Plant and Equipment(Net PPE) was $697 Mil.
Depreciation, Depletion and Amortization(DDA) was $128 Mil.
Selling, General & Admin. Expense(SGA) was $1,987 Mil.
Total Current Liabilities was $752 Mil.
Long-Term Debt was $1,529 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)
=(860.549 / 8909.405) / (590.16 / 7192.633)
=0.09658883 / 0.08205062
=1.1772

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)
=(2833.529 / 7192.633) / (3395.802 / 8909.405)
=0.39394878 / 0.38114801
=1.0336

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 - (3567.594 + 811.576) / 8303.199) / (1 - (2340.712 + 696.567) / 5647.837)
=0.47259243 / 0.46222262
=1.0224

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
=8909.405 / 7192.633
=1.2387

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))
=(128.192 / (128.192 + 696.567)) / (206.086 / (206.086 + 811.576))
=0.15542965 / 0.20250928
=0.7675

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)
=(2371.319 / 8909.405) / (1987.271 / 7192.633)
=0.26615908 / 0.27629256
=0.9633

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)
=((3275.662 + 1210.785) / 8303.199) / ((1528.668 + 751.97) / 5647.837)
=0.54032753 / 0.40380733
=1.3381

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
=(457.488 - 4.728 - 635.014) / 8303.199
=-0.0219

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.

LKQ Corp has a M-score of -2.31 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.

LKQ Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.7860.69530.96061.03931.11380.87771.19650.98610.91951.2218
GMI 1.00921.01510.97591.02331.041.0181.02011.04190.99871.0089
AQI 1.21330.97270.95960.96741.03280.9750.97030.99150.96971.0224
SGI 1.42751.69371.0731.2061.32391.26091.22791.33141.06711.1934
DEPI 1.1330.661.00071.04420.97590.91630.91010.82251.06830.7675
SGAI 0.95370.98791.0050.95140.97090.99390.97120.96420.99770.9947
LVGI 1.75090.88030.90.89231.23050.99591.04281.07440.87441.3381
TATA 0.0059-0.0183-0.02040.00430.00080.0152-0.0246-0.0013-0.0214-0.0206
M-score -1.48-2.23-2.54-2.19-2.12-2.30-2.23-2.22-2.56-2.32

LKQ Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.04910.98610.8910.88450.91950.91951.2841.34821.28231.1772
GMI 1.03211.04191.03391.02261.01160.99870.99381.00871.02451.0336
AQI 0.94280.99150.95880.96681.00320.96971.05531.011.01381.0224
SGI 1.32381.33141.25421.17941.11851.06711.06561.13331.19361.2387
DEPI 0.82950.82250.80820.88150.9571.06831.1641.26971.0870.7675
SGAI 0.96070.96420.96860.97990.99170.99771.00860.99050.96930.9633
LVGI 1.08061.07440.93310.88260.88480.87441.16461.28581.2741.3381
TATA -0.0056-0.0013-0.0153-0.0205-0.0281-0.0214-0.0091-0.0204-0.0113-0.0219
M-score -2.22-2.22-2.42-2.50-2.54-2.56-2.22-2.19-2.16-2.31
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