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GuruFocus has detected 4 Warning Signs with Cerner Corp $CERN.
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Cerner Corp (NAS:CERN)
Beneish M-Score
-2.82 (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.

Cerner Corp has a M-score of -2.82 suggests that the company is not a manipulator.

CERN' s Beneish M-Score Range Over the Past 10 Years
Min: -4.33   Max: -1.75
Current: -2.82

-4.33
-1.75

During the past 13 years, the highest Beneish M-Score of Cerner Corp was -1.75. The lowest was -4.33. And the median was -2.71.


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 Cerner 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 * 0.995+0.528 * 0.9967+0.404 * 0.9288+0.892 * 1.077+0.115 * 1.0297
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0008+4.679 * -0.0807-0.327 * 0.9906
=-2.82

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

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $966 Mil.
Revenue was 1260.486 + 1257.819 + 1184.557 + 1215.962 = $4,919 Mil.
Gross Profit was 1061.493 + 1042.822 + 1001.587 + 1010.406 = $4,116 Mil.
Total Current Assets was $1,826 Mil.
Total Assets was $5,803 Mil.
Property, Plant and Equipment(Net PPE) was $1,569 Mil.
Depreciation, Depletion and Amortization(DDA) was $520 Mil.
Selling, General & Admin. Expense(SGA) was $2,521 Mil.
Total Current Liabilities was $834 Mil.
Long-Term Debt was $533 Mil.
Net Income was 173.213 + 149.691 + 169.979 + 166.454 = $659 Mil.
Non Operating Income was -1.116 + 3.687 + -0.417 + 2.47 = $5 Mil.
Cash Flow from Operations was 303.585 + 333.238 + 240.349 + 245.82 = $1,123 Mil.
Accounts Receivable was $902 Mil.
Revenue was 1138.135 + 1175.294 + 1127.887 + 1125.997 = $4,567 Mil.
Gross Profit was 962.542 + 976.078 + 937.304 + 933.675 = $3,810 Mil.
Total Current Assets was $1,729 Mil.
Total Assets was $5,594 Mil.
Property, Plant and Equipment(Net PPE) was $1,366 Mil.
Depreciation, Depletion and Amortization(DDA) was $471 Mil.
Selling, General & Admin. Expense(SGA) was $2,339 Mil.
Total Current Liabilities was $776 Mil.
Long-Term Debt was $554 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)
=(966.479 / 4918.824) / (901.892 / 4567.313)
=0.19648579 / 0.19746665
=0.995

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)
=(3809.599 / 4567.313) / (4116.308 / 4918.824)
=0.83410071 / 0.83684799
=0.9967

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 - (1826.11 + 1569.023) / 5803.208) / (1 - (1728.638 + 1366.479) / 5594.492)
=0.41495583 / 0.44675638
=0.9288

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
=4918.824 / 4567.313
=1.077

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))
=(470.906 / (470.906 + 1366.479)) / (519.943 / (519.943 + 1569.023))
=0.25629141 / 0.24889969
=1.0297

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)
=(2521.011 / 4918.824) / (2338.992 / 4567.313)
=0.51252312 / 0.51211555
=1.0008

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)
=((532.747 + 833.539) / 5803.208) / ((553.68 + 775.932) / 5594.492)
=0.23543633 / 0.23766447
=0.9906

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
=(659.337 - 4.624 - 1122.992) / 5803.208
=-0.0807

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.

Cerner Corp has a M-score of -2.82 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.

Cerner Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.9811.08740.98640.93390.83190.9590.91380.96271.24270.8492
GMI 0.96710.99070.98981.0061.03421.03590.93761.0010.99040.9914
AQI 0.93371.18470.80131.39911.04741.0791.03810.73681.57081.0014
SGI 1.10291.10270.99751.10671.19081.20981.0921.1691.30051.0839
DEPI 1.04430.95210.96080.97140.92191.07851.1261.01210.96011.0472
SGAI 1.02930.9821.00130.98010.94950.96451.13550.95081.06561.0051
LVGI 0.82550.87310.87740.73091.13511.10450.94860.83851.5671.0187
TATA -0.0865-0.0492-0.0718-0.0902-0.0809-0.0876-0.0755-0.0734-0.0734-0.0935
M-score -2.80-2.43-2.88-2.62-2.85-2.71-2.84-2.75-2.31-2.99

Cerner Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.96271.41891.35051.3681.24270.79820.82310.8320.84920.995
GMI 1.0011.00840.99790.99780.99040.98530.99070.98620.99140.9967
AQI 0.73681.27931.26951.58861.57081.02280.93430.90721.00140.9288
SGI 1.1691.19851.23061.27631.30051.26381.19781.12881.08391.077
DEPI 1.01211.05771.00930.95370.96010.90390.97311.03081.04721.0297
SGAI 0.95080.95450.99470.99951.06561.0510.99970.99861.00511.0008
LVGI 0.83851.48271.3611.4821.5670.93770.96040.89681.01870.9906
TATA -0.0734-0.0742-0.0488-0.0542-0.0734-0.088-0.1006-0.0886-0.0935-0.0807
M-score -2.75-2.29-2.19-2.07-2.31-2.84-2.96-2.94-2.99-2.82
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