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GuruFocus has detected 2 Warning Signs with Flowers Foods Inc $FLO.
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Flowers Foods Inc (NYSE:FLO)
Beneish M-Score
-2.71 (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.

Flowers Foods Inc has a M-score of -2.71 suggests that the company is not a manipulator.

FLO' s Beneish M-Score Range Over the Past 10 Years
Min: -3.51   Max: -2.08
Current: -2.71

-3.51
-2.08

During the past 13 years, the highest Beneish M-Score of Flowers Foods Inc was -2.08. The lowest was -3.51. 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 Flowers Foods 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 * 0.9816+0.528 * 0.9876+0.404 * 1.002+0.892 * 1.0191+0.115 * 0.9165
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0409+4.679 * -0.0506-0.327 * 0.9111
=-2.71

* 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 $284 Mil.
Revenue was 1187.649 + 868.717 + 918.791 + 935.025 = $3,910 Mil.
Gross Profit was 579.708 + 418.255 + 442.031 + 457.07 = $1,897 Mil.
Total Current Assets was $488 Mil.
Total Assets was $2,737 Mil.
Property, Plant and Equipment(Net PPE) was $756 Mil.
Depreciation, Depletion and Amortization(DDA) was $145 Mil.
Selling, General & Admin. Expense(SGA) was $1,488 Mil.
Total Current Liabilities was $353 Mil.
Long-Term Debt was $882 Mil.
Net Income was 60.418 + 13.042 + 40.216 + 51.155 = $165 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 75.994 + 61.035 + 91.152 + 75.112 = $303 Mil.
Accounts Receivable was $284 Mil.
Revenue was 1204.352 + 858.363 + 885.302 + 888.795 = $3,837 Mil.
Gross Profit was 583.162 + 402.424 + 421.257 + 431.542 = $1,838 Mil.
Total Current Assets was $495 Mil.
Total Assets was $2,816 Mil.
Property, Plant and Equipment(Net PPE) was $788 Mil.
Depreciation, Depletion and Amortization(DDA) was $136 Mil.
Selling, General & Admin. Expense(SGA) was $1,402 Mil.
Total Current Liabilities was $441 Mil.
Long-Term Debt was $954 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)
=(283.946 / 3910.182) / (283.848 / 3836.812)
=0.07261708 / 0.07398017
=0.9816

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)
=(1838.385 / 3836.812) / (1897.064 / 3910.182)
=0.47914388 / 0.48516003
=0.9876

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 - (487.517 + 756.478) / 2736.725) / (1 - (495.129 + 787.767) / 2815.672)
=0.54544392 / 0.54437307
=1.002

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
=3910.182 / 3836.812
=1.0191

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))
=(135.825 / (135.825 + 787.767)) / (144.59 / (144.59 + 756.478))
=0.14706169 / 0.16046514
=0.9165

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)
=(1487.613 / 3910.182) / (1402.292 / 3836.812)
=0.38044597 / 0.36548364
=1.0409

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)
=((881.787 + 352.931) / 2736.725) / ((953.821 + 440.538) / 2815.672)
=0.45116627 / 0.49521358
=0.9111

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
=(164.831 - 0 - 303.293) / 2736.725
=-0.0506

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.

Flowers Foods Inc has a M-score of -2.71 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.

Flowers Foods Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.96811.09080.93180.94031.03591.26320.80490.92491.17550.9393
GMI 1.0151.02781.02390.97641.01691.00540.98860.98320.99840.9927
AQI 1.06371.30290.99191.01251.02661.28021.13751.03161.14241.0062
SGI 1.07841.18571.0770.98961.07751.09291.23141.00441.00791.0393
DEPI 1.01611.07760.93740.95951.01720.97881.03080.87310.97640.923
SGAI 0.9620.95790.96131.0211.00780.9831.00881.01540.99061.0244
LVGI 0.82011.63450.84750.77811.37771.25571.09290.88971.08160.9942
TATA -0.12150.018-0.0782-0.1275-0.007-0.0405-0.0158-0.0579-0.0454-0.066
M-score -2.91-2.20-2.78-3.08-2.51-2.31-2.51-2.79-2.50-2.82

Flowers Foods Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.92490.96460.98881.03711.17551.07171.08871.02870.93930.9816
GMI 0.98320.98090.97610.98020.99841.00441.00761.0050.99270.9876
AQI 1.03161.00861.00111.13811.14241.15341.16061.02811.00621.002
SGI 1.00440.99611.00721.02721.00791.02561.03351.03141.03931.0191
DEPI 0.87310.91020.93640.94430.97640.95790.95160.93710.9230.9165
SGAI 1.01541.01941.01911.0330.99060.98590.99250.99521.02441.0409
LVGI 0.88970.92170.90790.98751.08161.17141.17281.0610.99420.9111
TATA -0.0579-0.056-0.071-0.0692-0.0454-0.0467-0.0389-0.0498-0.066-0.0506
M-score -2.79-2.77-2.81-2.71-2.50-2.60-2.54-2.67-2.82-2.71
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