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GuruFocus has detected 2 Warning Signs with AutoZone Inc $AZO.
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AutoZone Inc (NYSE:AZO)
Beneish M-Score
-2.40 (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.

AutoZone Inc has a M-score of -2.40 suggests that the company is not a manipulator.

AZO' s Beneish M-Score Range Over the Past 10 Years
Min: -3.33   Max: 0.98
Current: -2.4

-3.33
0.98

During the past 13 years, the highest Beneish M-Score of AutoZone Inc was 0.98. The lowest was -3.33. And the median was -2.54.


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 AutoZone 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 * 1.0213+0.528 * 1.0013+0.404 * 0.9372+0.892 * 0.9398+0.115 * 1.3832
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0082+4.679 * 0.0188-0.327 * 0.9854
=-2.40

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

This Year (May17) TTM:Last Year (Aug16) TTM:
Accounts Receivable was $276 Mil.
Revenue was 2619.007 + 2619.007 + 2289.219 + 2467.845 = $9,995 Mil.
Gross Profit was 1378.418 + 1378.418 + 1205.536 + 1301.542 = $5,264 Mil.
Total Current Assets was $4,507 Mil.
Total Assets was $9,028 Mil.
Property, Plant and Equipment(Net PPE) was $3,904 Mil.
Depreciation, Depletion and Amortization(DDA) was $220 Mil.
Selling, General & Admin. Expense(SGA) was $3,362 Mil.
Total Current Liabilities was $4,794 Mil.
Long-Term Debt was $5,153 Mil.
Net Income was 331.7 + 331.7 + 237.145 + 278.125 = $1,179 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 445.332 + 0 + 157.398 + 406.5 = $1,009 Mil.
Accounts Receivable was $288 Mil.
Revenue was 3398.769 + 2593.672 + 2257.192 + 2386.043 = $10,636 Mil.
Gross Profit was 1794.748 + 1370.458 + 1190.596 + 1252.934 = $5,609 Mil.
Total Current Assets was $4,240 Mil.
Total Assets was $8,600 Mil.
Property, Plant and Equipment(Net PPE) was $3,733 Mil.
Depreciation, Depletion and Amortization(DDA) was $297 Mil.
Selling, General & Admin. Expense(SGA) was $3,548 Mil.
Total Current Liabilities was $4,690 Mil.
Long-Term Debt was $4,924 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)
=(276.11 / 9995.078) / (287.68 / 10635.676)
=0.0276246 / 0.02704859
=1.0213

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)
=(5608.736 / 10635.676) / (5263.914 / 9995.078)
=0.52735115 / 0.52665062
=1.0013

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 - (4507.249 + 3904.152) / 9028.264) / (1 - (4239.573 + 3733.254) / 8599.787)
=0.06832576 / 0.07290413
=0.9372

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
=9995.078 / 10635.676
=0.9398

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))
=(297.397 / (297.397 + 3733.254)) / (219.988 / (219.988 + 3904.152))
=0.07378386 / 0.05334155
=1.3832

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)
=(3361.903 / 9995.078) / (3548.341 / 10635.676)
=0.33635585 / 0.33362628
=1.0082

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)
=((5152.843 + 4793.54) / 9028.264) / ((4924.119 + 4690.32) / 8599.787)
=1.10169386 / 1.11798571
=0.9854

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
=(1178.67 - 0 - 1009.23) / 9028.264
=0.0188

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.

AutoZone Inc has a M-score of -2.40 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.

AutoZone Inc Annual Data

Aug07Aug08Aug09Aug10Aug11Aug12Aug13Aug14Aug15Aug16
DSRI 0.71831.12541.69920.92071.01991.07621.00041.131.14761.1117
GMI 0.99470.99130.99970.99410.9880.99060.99390.99510.9960.9916
AQI 0.9430.97741.04341.04360.88120.98831.14541.02660.95640.943
SGI 1.03721.05721.04511.08011.09651.06581.06321.03581.07511.044
DEPI 0.93380.99940.96830.97451.06660.99181.00230.97660.98680.9689
SGAI 1.00431.00940.99990.98871.00061.00210.99581.00991.01081.0073
LVGI 1.01671.03251.12621.04461.07731.02361.00880.97560.9950.9701
TATA -0.0519-0.0747-0.0382-0.0822-0.0754-0.0469-0.0578-0.0257-0.0274-0.0391
M-score -2.99-2.69-2.00-2.87-2.80-2.59-2.64-2.44-2.43-2.54

AutoZone Inc Quarterly Data

May15Aug15Nov15Feb16May16Aug16Nov16Feb17Apr17May17
DSRI 1.06361.14761.18641.41311.31221.11171.05010.809601.0213
GMI 0.99430.9960.99490.99350.99210.99160.99250.99490.99851.0013
AQI 1.01860.95640.90330.88120.89650.9430.93510.93110.93380.9372
SGI 1.04471.07511.06961.06451.05841.0441.03921.0311.02350.9398
DEPI 0.99710.98680.98330.95730.95770.96890.96580.99271.28881.3832
SGAI 1.01051.01081.00861.00931.01241.00731.00591.00341.00181.0082
LVGI 0.96580.9950.99950.99230.98760.97010.97130.99520.97120.9854
TATA -0.0116-0.0274-0.0302-0.0495-0.048-0.0391-0.043-0.03470.02520.0188
M-score -2.42-2.43-2.43-2.33-2.41-2.54-2.63-2.82-3.25-2.40
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