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GuruFocus has detected 5 Warning Signs with Constellation Brands Inc $STZ.
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Constellation Brands Inc (NYSE:STZ)
Beneish M-Score
-2.59 (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.

Constellation Brands Inc has a M-score of -2.59 suggests that the company is not a manipulator.

STZ' s Beneish M-Score Range Over the Past 10 Years
Min: -3.44   Max: -1.27
Current: -2.59

-3.44
-1.27

During the past 13 years, the highest Beneish M-Score of Constellation Brands Inc was -1.27. The lowest was -3.44. And the median was -2.43.


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 Constellation Brands 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 * 0.8987+0.528 * 0.9333+0.404 * 0.9792+0.892 * 1.1196+0.115 * 0.8942
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0565+4.679 * -0.0101-0.327 * 1.0454
=-2.59

* 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 $737 Mil.
Revenue was 1628 + 1810.5 + 2021.2 + 1871.8 = $7,332 Mil.
Gross Profit was 787.7 + 891.4 + 969 + 881.3 = $3,529 Mil.
Total Current Assets was $3,230 Mil.
Total Assets was $18,602 Mil.
Property, Plant and Equipment(Net PPE) was $3,933 Mil.
Depreciation, Depletion and Amortization(DDA) was $294 Mil.
Selling, General & Admin. Expense(SGA) was $1,392 Mil.
Total Current Liabilities was $2,698 Mil.
Long-Term Debt was $7,721 Mil.
Net Income was 452 + 405.9 + 358.9 + 318.3 = $1,535 Mil.
Non Operating Income was -0.9 + 27.5 + 0 + 0.7 = $27 Mil.
Cash Flow from Operations was 280.3 + 370.8 + 699 + 345.9 = $1,696 Mil.
Accounts Receivable was $733 Mil.
Revenue was 1543.2 + 1640.5 + 1733.4 + 1631.3 = $6,548 Mil.
Gross Profit was 696.1 + 733.5 + 775.6 + 737.1 = $2,942 Mil.
Total Current Assets was $2,978 Mil.
Total Assets was $16,965 Mil.
Property, Plant and Equipment(Net PPE) was $3,333 Mil.
Depreciation, Depletion and Amortization(DDA) was $221 Mil.
Selling, General & Admin. Expense(SGA) was $1,177 Mil.
Total Current Liabilities was $2,272 Mil.
Long-Term Debt was $6,816 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)
=(737 / 7331.5) / (732.5 / 6548.4)
=0.10052513 / 0.11185939
=0.8987

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)
=(2942.3 / 6548.4) / (3529.4 / 7331.5)
=0.44931586 / 0.48140217
=0.9333

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 - (3230 + 3932.8) / 18602.4) / (1 - (2977.6 + 3333.4) / 16965)
=0.61495291 / 0.62799882
=0.9792

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
=7331.5 / 6548.4
=1.1196

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))
=(221 / (221 + 3333.4)) / (293.9 / (293.9 + 3932.8))
=0.06217646 / 0.06953415
=0.8942

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)
=(1392.4 / 7331.5) / (1177.2 / 6548.4)
=0.18992021 / 0.1797691
=1.0565

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)
=((7720.7 + 2697.6) / 18602.4) / ((6816.2 + 2272.3) / 16965)
=0.56005139 / 0.5357206
=1.0454

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
=(1535.1 - 27.3 - 1696) / 18602.4
=-0.0101

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.

Constellation Brands Inc has a M-score of -2.59 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.

Constellation Brands Inc Annual Data

Feb08Feb09Feb10Feb11Feb12Feb13Feb14Feb15Feb16Feb17
DSRI 1.14810.74031.06560.81891.31611.02370.76220.77231.12590.8987
GMI 0.86011.00920.98920.95260.89261.00950.96870.95650.9520.9333
AQI 0.96991.02650.98871.10840.99630.95961.29390.94360.99770.9792
SGI 0.72330.96860.92070.99030.79661.05341.74091.23841.08631.1196
DEPI 0.9780.81841.0180.91521.29490.88941.19921.02181.12670.8942
SGAI 1.44011.07260.8910.94831.05281.03390.87830.97291.00491.0565
LVGI 1.12661.04080.87140.92280.96071.01691.13390.9270.9841.0454
TATA -0.1384-0.1238-0.0638-0.0424-0.0798-0.05090.072-0.0171-0.0241-0.0101
M-score -3.44-3.36-2.74-2.81-2.76-2.68-1.60-2.57-2.41-2.59

Constellation Brands Inc Quarterly Data

Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17
DSRI 0.75130.77230.9971.03140.95531.12591.00351.01661.05140.8987
GMI 0.94040.95650.9750.97130.94910.9520.94880.94720.94230.9333
AQI 0.95050.94360.97120.95970.94820.99770.990.98851.01040.9792
SGI 1.39571.23841.07221.06791.06681.08631.10691.131.13921.1196
DEPI 0.931.02181.07261.06691.13011.12671.15911.18511.08550.8942
SGAI 0.93230.97291.04871.00561.01041.00490.973211.0271.0565
LVGI 0.92140.9270.92340.96380.9390.9840.99530.96531.04531.0454
TATA -0.0121-0.0171-0.0132-0.0166-0.0263-0.0241-0.0266-0.0291-0.0252-0.0101
M-score -2.43-2.57-2.48-2.48-2.60-2.41-2.51-2.48-2.46-2.59
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