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GuruFocus has detected 1 Warning Sign with Brinker International Inc $EAT.
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Brinker International Inc (NYSE:EAT)
Beneish M-Score
-3.12 (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.

Brinker International Inc has a M-score of -3.11 suggests that the company is not a manipulator.

EAT' s Beneish M-Score Range Over the Past 10 Years
Min: -6.27   Max: 2.43
Current: -3.12

-6.27
2.43

During the past 13 years, the highest Beneish M-Score of Brinker International Inc was 2.43. The lowest was -6.27. And the median was -3.00.


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 Brinker International 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 * 0.9164+0.528 * 1.0373+0.404 * 1.1429+0.892 * 1.0261+0.115 * 0.9421
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0212+4.679 * -0.1266-0.327 * 1.1716
=-3.11

* 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 $38 Mil.
Revenue was 810.641 + 771.043 + 758.492 + 881.681 = $3,222 Mil.
Gross Profit was 154.734 + 135.683 + 118.977 + 182.496 = $592 Mil.
Total Current Assets was $148 Mil.
Total Assets was $1,403 Mil.
Property, Plant and Equipment(Net PPE) was $997 Mil.
Depreciation, Depletion and Amortization(DDA) was $157 Mil.
Selling, General & Admin. Expense(SGA) was $138 Mil.
Total Current Liabilities was $437 Mil.
Long-Term Debt was $1,326 Mil.
Net Income was 42.369 + 34.637 + 23.233 + 62.342 = $163 Mil.
Non Operating Income was 0.402 + 0.383 + 0.299 + 0.375 = $1 Mil.
Cash Flow from Operations was 102.486 + 74.916 + 66.22 + 95.119 = $339 Mil.
Accounts Receivable was $41 Mil.
Revenue was 824.639 + 788.61 + 762.559 + 764.147 = $3,140 Mil.
Gross Profit was 159.36 + 146.555 + 130.206 + 162.212 = $598 Mil.
Total Current Assets was $197 Mil.
Total Assets was $1,489 Mil.
Property, Plant and Equipment(Net PPE) was $1,053 Mil.
Depreciation, Depletion and Amortization(DDA) was $154 Mil.
Selling, General & Admin. Expense(SGA) was $132 Mil.
Total Current Liabilities was $422 Mil.
Long-Term Debt was $1,175 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)
=(38.326 / 3221.857) / (40.759 / 3139.955)
=0.01189562 / 0.01298076
=0.9164

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)
=(598.333 / 3139.955) / (591.89 / 3221.857)
=0.19055464 / 0.18371082
=1.0373

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 - (148.196 + 997.053) / 1403.078) / (1 - (196.724 + 1053.024) / 1489.188)
=0.18375956 / 0.16078561
=1.1429

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
=3221.857 / 3139.955
=1.0261

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))
=(154.364 / (154.364 + 1053.024)) / (156.559 / (156.559 + 997.053))
=0.12784954 / 0.13571201
=0.9421

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)
=(138.014 / 3221.857) / (131.719 / 3139.955)
=0.04283679 / 0.04194933
=1.0212

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)
=((1325.604 + 437.267) / 1403.078) / ((1174.66 + 422.291) / 1489.188)
=1.25643122 / 1.0723636
=1.1716

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
=(162.581 - 1.459 - 338.741) / 1403.078
=-0.1266

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.

Brinker International Inc has a M-score of -3.11 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.

Brinker International Inc Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 0.89991.12681.11821.10040.98120.99271.00571.06320.94350.8693
GMI 0.24261.21453.18760.84591.27290.95780.95260.98550.9711.043
AQI 0.92441.2170.97331.30211.16310.98521.09390.99731.0071.1379
SGI 1.05430.93120.84650.82850.9661.02151.01031.0211.03191.085
DEPI 0.83931.17221.03750.8750.99051.01320.950.98710.92490.9464
SGAI 14.24980.67810.15711.43360.45991.05050.91510.96130.97210.9122
LVGI 1.31761.10060.89520.90231.16281.12391.17291.08021.11081.0852
TATA -0.1122-0.1431-0.1053-0.1105-0.0843-0.1084-0.0895-0.1396-0.1212-0.1327
M-score -5.88-2.85-1.67-3.07-2.67-3.05-2.92-3.09-3.12-3.09

Brinker International Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.11030.9530.94350.91870.83710.90330.86930.99720.98830.9164
GMI 0.9760.98020.9710.97780.9961.02841.0431.0551.05971.0373
AQI 0.9740.97331.0071.15411.14131.10131.13790.99931.05831.1429
SGI 1.03711.03981.03191.04021.04251.04731.0851.06541.0441.0261
DEPI 0.96250.93930.92490.96530.95690.94980.94640.91540.93340.9421
SGAI 0.9750.99030.97210.99650.97340.92520.91220.89450.92641.0212
LVGI 1.0991.09581.11081.10771.11511.15041.08521.30641.23881.1716
TATA -0.1408-0.1332-0.1212-0.0957-0.1017-0.1338-0.1327-0.1548-0.1356-0.1266
M-score -3.06-3.17-3.12-2.95-3.05-3.14-3.09-3.21-3.10-3.11
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