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GuruFocus has detected 4 Warning Signs with Conn's Inc $CONN.
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Conn's Inc (NAS:CONN)
Beneish M-Score
-2.45 (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.

Conn's Inc has a M-score of -2.45 suggests that the company is not a manipulator.

CONN' s Beneish M-Score Range Over the Past 10 Years
Min: -2.45   Max: 9
Current: -2.45

-2.45
9

During the past 13 years, the highest Beneish M-Score of Conn's Inc was 9.00. The lowest was -2.45. And the median was -1.31.


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 Conn's 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 * 0.9285+0.528 * 0.9979+0.404 * 1.0191+0.892 * 0.9899+0.115 * 0.8498
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0714+4.679 * 0.0266-0.327 * 0.9811
=-2.45

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

This Year (Jan17) TTM:Last Year (Jan16) TTM:
Accounts Receivable was $771 Mil.
Revenue was 432.805 + 376.773 + 398.157 + 389.113 = $1,597 Mil.
Gross Profit was 215.432 + 184.399 + 189.288 + 184.647 = $774 Mil.
Total Current Assets was $1,088 Mil.
Total Assets was $1,941 Mil.
Property, Plant and Equipment(Net PPE) was $159 Mil.
Depreciation, Depletion and Amortization(DDA) was $29 Mil.
Selling, General & Admin. Expense(SGA) was $467 Mil.
Total Current Liabilities was $167 Mil.
Long-Term Debt was $1,144 Mil.
Net Income was -0.074 + -3.815 + -11.924 + -9.749 = $-26 Mil.
Non Operating Income was -76.908 + -68.74 + -66.158 + -70.571 = $-282 Mil.
Cash Flow from Operations was 22.119 + 51.113 + 23.245 + 108.653 = $205 Mil.
Accounts Receivable was $839 Mil.
Revenue was 456.819 + 395.233 + 396.05 + 365.076 = $1,613 Mil.
Gross Profit was 216.188 + 192.332 + 193.589 + 177.943 = $780 Mil.
Total Current Assets was $1,163 Mil.
Total Assets was $2,025 Mil.
Property, Plant and Equipment(Net PPE) was $151 Mil.
Depreciation, Depletion and Amortization(DDA) was $23 Mil.
Selling, General & Admin. Expense(SGA) was $441 Mil.
Total Current Liabilities was $146 Mil.
Long-Term Debt was $1,249 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)
=(771.448 / 1596.848) / (839.335 / 1613.178)
=0.48310672 / 0.52029906
=0.9285

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)
=(780.052 / 1613.178) / (773.766 / 1596.848)
=0.48354986 / 0.48455833
=0.9979

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 - (1087.673 + 159.202) / 1941.134) / (1 - (1163 + 151.483) / 2025.3)
=0.3576564 / 0.35096875
=1.0191

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
=1596.848 / 1613.178
=0.9899

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))
=(22.706 / (22.706 + 151.483)) / (28.846 / (28.846 + 159.202))
=0.13035266 / 0.15339701
=0.8498

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)
=(467.273 / 1596.848) / (440.581 / 1613.178)
=0.29262209 / 0.27311369
=1.0714

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)
=((1144.393 + 167.381) / 1941.134) / ((1248.879 + 146.125) / 2025.3)
=0.67577715 / 0.68878882
=0.9811

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
=(-25.562 - -282.377 - 205.13) / 1941.134
=0.0266

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.

Conn's Inc has a M-score of -2.45 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.

Conn's Inc Annual Data

Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16Jan17
DSRI 0.149310.23856.51071.00541.07370.97511.01060.98031.20160.9285
GMI 1.06690.92180.98140.97050.96810.94470.93470.99010.98610.9979
AQI 1.01983.27973.41190.96731.03420.98570.99621.02810.93181.0191
SGI 1.08341.16310.92550.91190.97941.09181.381.24411.08620.9899
DEPI 1.02410.98620.91260.67481.08221.09841.69831.0081.02240.8498
SGAI 0.94520.94471.10671.02411.04170.85470.96031.03011.03611.0714
LVGI 0.80851.68961.8240.91090.93890.85681.1261.08881.23550.9811
TATA 0.35920.46450.08460.10310.10410.24360.38290.31150.24540.0266
M-score -1.399.003.59-2.11-1.92-1.23-0.33-0.85-1.18-2.45

Conn's Inc Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 0.88030.98030.91670.94521.05961.20161.14981.13141.05170.9285
GMI 1.03120.99010.97820.96930.95150.98610.9961.00781.01180.9979
AQI 0.95051.02811.03931.00630.94680.93180.93780.95851.08951.0191
SGI 1.31081.24411.18521.14521.11521.08621.08081.05221.02380.9899
DEPI 1.55311.0081.0111.04390.82781.02240.99430.93810.97270.8498
SGAI 0.88691.03011.0521.06941.12041.03611.06241.09921.08661.0714
LVGI 1.10051.08881.03031.0571.18061.23551.27391.22691.07010.9811
TATA 0.35070.31150.29950.27090.2210.24540.21190.14860.08990.0266
M-score -0.63-0.85-1.00-1.17-1.44-1.18-1.41-1.73-1.99-2.45
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