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GuruFocus has detected 2 Warning Signs with Sonic Corp $SONC.
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Sonic Corp (NAS:SONC)
Beneish M-Score
-3.30 (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.

Sonic Corp has a M-score of -3.30 suggests that the company is not a manipulator.

SONC' s Beneish M-Score Range Over the Past 10 Years
Min: -7.49   Max: -0.12
Current: -3.3

-7.49
-0.12

During the past 13 years, the highest Beneish M-Score of Sonic Corp was -0.12. The lowest was -7.49. 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 Sonic 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 * 0.5486+0.528 * 0.9516+0.404 * 1.1306+0.892 * 0.9+0.115 * 0.9299
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0356+4.679 * -0.0549-0.327 * 1.232
=-3.30

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

This Year (Feb17) TTM:Last Year (Feb16) TTM:
Accounts Receivable was $15.7 Mil.
Revenue was 100.158 + 129.551 + 162.118 + 165.239 = $557.1 Mil.
Gross Profit was 42.932 + 54.243 + 69.631 + 70.796 = $237.6 Mil.
Total Current Assets was $94.8 Mil.
Total Assets was $571.7 Mil.
Property, Plant and Equipment(Net PPE) was $359.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $42.4 Mil.
Selling, General & Admin. Expense(SGA) was $78.4 Mil.
Total Current Liabilities was $56.7 Mil.
Long-Term Debt was $609.4 Mil.
Net Income was 10.963 + 13.118 + 25.437 + 15.353 = $64.9 Mil.
Non Operating Income was 0 + 0 + -8.75 + 0 = $-8.8 Mil.
Cash Flow from Operations was 8.344 + 19.231 + 37.977 + 39.474 = $105.0 Mil.
Accounts Receivable was $31.9 Mil.
Revenue was 133.16 + 145.803 + 175.266 + 164.748 = $619.0 Mil.
Gross Profit was 51.488 + 57.585 + 73.989 + 68.168 = $251.2 Mil.
Total Current Assets was $85.0 Mil.
Total Assets was $606.7 Mil.
Property, Plant and Equipment(Net PPE) was $411.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $44.7 Mil.
Selling, General & Admin. Expense(SGA) was $84.1 Mil.
Total Current Liabilities was $69.5 Mil.
Long-Term Debt was $504.4 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)
=(15.749 / 557.066) / (31.9 / 618.977)
=0.02827134 / 0.05153665
=0.5486

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)
=(251.23 / 618.977) / (237.602 / 557.066)
=0.40587938 / 0.42652397
=0.9516

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 - (94.84 + 359.119) / 571.664) / (1 - (85.024 + 411.226) / 606.747)
=0.20589892 / 0.1821138
=1.1306

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
=557.066 / 618.977
=0.9

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))
=(44.749 / (44.749 + 411.226)) / (42.373 / (42.373 + 359.119))
=0.09813915 / 0.10553884
=0.9299

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)
=(78.414 / 557.066) / (84.135 / 618.977)
=0.14076249 / 0.13592589
=1.0356

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)
=((609.417 + 56.681) / 571.664) / ((504.356 + 69.484) / 606.747)
=1.16519144 / 0.94576487
=1.232

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
=(64.871 - -8.75 - 105.026) / 571.664
=-0.0549

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.

Sonic Corp has a M-score of -3.30 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.

Sonic Corp Annual Data

Aug07Aug08Aug09Aug10Aug11Aug12Aug13Aug14Aug15Aug16
DSRI 0.5162.3421.05330.83750.84171.13750.97131.08860.92861.0204
GMI 0.90141.12720.9330.95941.02520.96270.98230.96540.95270.9709
AQI 1.09940.88250.80411.06871.15391.07410.94980.95511.04890.9975
SGI 1.11141.04440.87770.780.9910.99590.99791.0181.09731.0004
DEPI 0.92261.07120.94651.04880.98360.94240.94181.05280.88770.9874
SGAI 1.01540.99731.17991.35260.98041.00761.01521.03281.04161.0343
LVGI 3.08410.93530.90860.97990.92880.98330.95541.011.06331.1718
TATA -0.0669-0.0799-0.0642-0.0761-0.0616-0.0867-0.0774-0.0855-0.1159-0.0657
M-score -3.84-1.53-2.96-3.22-2.82-2.76-2.89-2.82-3.05-2.85

Sonic Corp Quarterly Data

Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17
DSRI 1.02151.00251.77440.92861.08060.85240.55391.02040.53170.5486
GMI 1.1731.16121.43230.77030.78260.78940.70750.97090.96480.9516
AQI 0.98390.96211.01841.04891.02551.01380.94840.99751.19831.1306
SGI 1.04111.07421.08621.09731.08221.06351.04181.00040.96410.9
DEPI 1.00010.92550.90920.88770.93140.96250.93780.98740.91380.9299
SGAI 1.02231.01581.03561.04161.05761.07711.05451.03431.02981.0356
LVGI 1.03141.06451.0471.06331.13941.05981.14711.17181.17811.232
TATA -0.0926-0.1136-0.122-0.1159-0.0999-0.0796-0.0723-0.0657-0.061-0.0549
M-score -2.79-2.91-2.06-3.14-2.97-3.07-3.43-2.85-3.24-3.30
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