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GuruFocus has detected 2 Warning Signs with LKQ Corp $LKQ.
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LKQ Corp (NAS:LKQ)
Beneish M-Score
-2.50 (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.

LKQ Corp has a M-score of -2.50 suggests that the company is not a manipulator.

LKQ' s Beneish M-Score Range Over the Past 10 Years
Min: -2.74   Max: -1.48
Current: -2.5

-2.74
-1.48

During the past 13 years, the highest Beneish M-Score of LKQ Corp was -1.48. The lowest was -2.74. And the median was -2.23.


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 LKQ 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 * 0.8992+0.528 * 1.0085+0.404 * 1.0039+0.892 * 1.2269+0.115 * 0.679
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9894+4.679 * -0.0237-0.327 * 0.9775
=-2.50

* 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 $974 Mil.
Revenue was 2342.843 + 1825.032 + 2386.83 + 2450.693 = $9,005 Mil.
Gross Profit was 930.093 + 785.907 + 883.412 + 921.947 = $3,521 Mil.
Total Current Assets was $3,318 Mil.
Total Assets was $8,122 Mil.
Property, Plant and Equipment(Net PPE) was $809 Mil.
Depreciation, Depletion and Amortization(DDA) was $224 Mil.
Selling, General & Admin. Expense(SGA) was $2,474 Mil.
Total Current Liabilities was $1,160 Mil.
Long-Term Debt was $2,933 Mil.
Net Income was 136.278 + 86.331 + 122.688 + 140.737 = $486 Mil.
Non Operating Income was 1.046 + 3.378 + 3.279 + -1.339 = $6 Mil.
Cash Flow from Operations was 172.293 + 110.863 + 168.921 + 220.386 = $672 Mil.
Accounts Receivable was $883 Mil.
Revenue was 1921.476 + 1748.919 + 1831.732 + 1838.07 = $7,340 Mil.
Gross Profit was 760.437 + 697.327 + 712.779 + 723.944 = $2,894 Mil.
Total Current Assets was $2,994 Mil.
Total Assets was $7,357 Mil.
Property, Plant and Equipment(Net PPE) was $759 Mil.
Depreciation, Depletion and Amortization(DDA) was $131 Mil.
Selling, General & Admin. Expense(SGA) was $2,038 Mil.
Total Current Liabilities was $1,049 Mil.
Long-Term Debt was $2,743 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)
=(973.67 / 9005.398) / (882.582 / 7340.197)
=0.10812071 / 0.12023955
=0.8992

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)
=(2894.487 / 7340.197) / (3521.359 / 9005.398)
=0.39433369 / 0.39102758
=1.0085

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 - (3318.126 + 809.208) / 8122.246) / (1 - (2993.887 + 758.641) / 7356.857)
=0.49184819 / 0.48992783
=1.0039

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
=9005.398 / 7340.197
=1.2269

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))
=(130.689 / (130.689 + 758.641)) / (223.524 / (223.524 + 809.208))
=0.1469522 / 0.2164395
=0.679

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)
=(2473.661 / 9005.398) / (2037.925 / 7340.197)
=0.27468647 / 0.27763901
=0.9894

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)
=((2933.277 + 1159.701) / 8122.246) / ((2743.197 + 1049.41) / 7356.857)
=0.50392194 / 0.51552001
=0.9775

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
=(486.034 - 6.364 - 672.463) / 8122.246
=-0.0237

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.

LKQ Corp has a M-score of -2.50 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.

LKQ Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.7860.69020.96781.03931.11380.87771.19650.98610.91951.2218
GMI 1.00921.01330.97771.02331.041.0181.02011.04190.99871.0089
AQI 1.21330.97270.95960.96741.03280.9750.97030.99150.96971.0224
SGI 1.42751.70631.06511.2061.32391.26091.22791.33141.06711.1934
DEPI 1.1330.661.00071.04420.97590.91630.91010.82251.06830.7675
SGAI 0.95370.98521.00770.95140.97090.99390.97120.96420.99770.9947
LVGI 1.75090.88030.90.89231.23050.99591.04281.07440.87441.3381
TATA 0.0059-0.0183-0.02040.00430.00080.0152-0.0246-0.0013-0.0214-0.0208
M-score -1.48-2.22-2.54-2.19-2.12-2.30-2.23-2.22-2.56-2.32

LKQ Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.98610.8910.88450.91950.91951.2841.34821.28231.22180.8992
GMI 1.04191.03391.02261.01160.99870.99381.00871.02451.00891.0085
AQI 0.99150.95880.96681.00320.96971.05531.011.01381.02241.0039
SGI 1.33141.25421.17941.11851.06711.06561.13331.19361.19341.2269
DEPI 0.82250.80820.88150.9571.06831.1641.26971.0870.76750.679
SGAI 0.96420.96860.97990.99170.99771.00860.99050.96930.99470.9894
LVGI 1.07440.93310.88260.88480.87441.16461.28581.2741.33810.9775
TATA -0.0013-0.0153-0.0205-0.0281-0.0214-0.0091-0.0199-0.0108-0.0208-0.0237
M-score -2.22-2.42-2.50-2.54-2.56-2.22-2.19-2.15-2.32-2.50
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