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GuruFocus has detected 1 Warning Sign with Rite Aid Corp $RAD.
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Rite Aid Corp (NYSE:RAD)
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.

Rite Aid Corp has a M-score of -2.45 suggests that the company is not a manipulator.

RAD' s Beneish M-Score Range Over the Past 10 Years
Min: -4.63   Max: -0.17
Current: -2.45

-4.63
-0.17

During the past 13 years, the highest Beneish M-Score of Rite Aid Corp was -0.17. The lowest was -4.63. And the median was -2.58.


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 Rite Aid 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 * 1.0352+0.528 * 1.0758+0.404 * 0.9304+0.892 * 1.0686+0.115 * 0.9141
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9664+4.679 * -0.0142-0.327 * 1.0067
=-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 (Feb17) TTM:Last Year (Feb16) TTM:
Accounts Receivable was $1,771 Mil.
Revenue was 8541.361 + 8089.726 + 8029.806 + 8184.181 = $32,845 Mil.
Gross Profit was 2068.162 + 1894.86 + 1916.743 + 1894.3 = $7,774 Mil.
Total Current Assets was $5,065 Mil.
Total Assets was $11,594 Mil.
Property, Plant and Equipment(Net PPE) was $2,252 Mil.
Depreciation, Depletion and Amortization(DDA) was $568 Mil.
Selling, General & Admin. Expense(SGA) was $7,242 Mil.
Total Current Liabilities was $3,005 Mil.
Long-Term Debt was $7,307 Mil.
Net Income was -21.142 + 15.01 + 14.773 + -4.588 = $4 Mil.
Non Operating Income was -49.539 + -0.501 + -0.174 + -6.837 = $-57 Mil.
Cash Flow from Operations was 60.41 + 152.587 + -147.078 + 159.944 = $226 Mil.
Accounts Receivable was $1,601 Mil.
Revenue was 8270.136 + 8154.184 + 7664.776 + 6647.561 = $30,737 Mil.
Gross Profit was 2041.556 + 2002.879 + 1922.291 + 1859.53 = $7,826 Mil.
Total Current Assets was $4,551 Mil.
Total Assets was $11,277 Mil.
Property, Plant and Equipment(Net PPE) was $2,255 Mil.
Depreciation, Depletion and Amortization(DDA) was $509 Mil.
Selling, General & Admin. Expense(SGA) was $7,013 Mil.
Total Current Liabilities was $2,997 Mil.
Long-Term Debt was $6,967 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)
=(1771.126 / 32845.074) / (1601.008 / 30736.657)
=0.05392364 / 0.0520879
=1.0352

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)
=(7826.256 / 30736.657) / (7774.065 / 32845.074)
=0.25462288 / 0.23668892
=1.0758

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 - (5065.288 + 2251.692) / 11593.752) / (1 - (4550.727 + 2255.398) / 11277.01)
=0.36888593 / 0.39646014
=0.9304

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
=32845.074 / 30736.657
=1.0686

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))
=(509.212 / (509.212 + 2255.398)) / (568.231 / (568.231 + 2251.692))
=0.18418945 / 0.20150586
=0.9141

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)
=(7242.359 / 32845.074) / (7013.346 / 30736.657)
=0.22050061 / 0.2281753
=0.9664

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)
=((7307.358 + 3005.248) / 11593.752) / ((6967.288 + 2996.895) / 11277.01)
=0.88949686 / 0.88358377
=1.0067

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
=(4.053 - -57.051 - 225.863) / 11593.752
=-0.0142

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.

Rite Aid Corp 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.

Rite Aid Corp Annual Data

Feb08Feb09Feb10Feb11Feb12Feb13Feb14Feb15Feb16Feb17
DSRI 1.27050.73271.85781.02971.0120.94371.01570.99451.40871.0352
GMI 0.98771.01951.00671.00161.02060.90241.00451.00451.12171.0758
AQI 0.95180.51340.93940.94330.88910.84080.9252.77581.41210.9304
SGI 1.39971.07950.97640.98231.03590.97211.00531.03931.15861.0686
DEPI 0.95060.76460.97760.95121.05621.0491.04851.02940.90190.9141
SGAI 1.04971.01520.96820.99560.97631.03960.98880.9820.9040.9664
LVGI 1.13541.32761.06211.07571.0551.01150.97660.76510.97631.0067
TATA -0.0976-0.3524-0.0254-0.123-0.0829-0.1001-0.06010.1715-0.0658-0.0142
M-score -2.42-4.63-1.87-3.10-2.87-3.15-2.75-0.84-2.03-2.45

Rite Aid Corp Quarterly Data

Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17
DSRI 1.13220.99451.02461.82721.39911.40871.43310.83320.98811.0352
GMI 1.03231.00450.99481.03481.08181.12171.17331.14281.11021.0758
AQI 1.0332.77582.17863.59513.73311.41211.62630.96530.94060.9304
SGI 1.03521.03931.03941.07361.11561.15861.20831.17181.11121.0686
DEPI 1.03031.02941.03380.99520.94860.90190.85630.87020.89310.9141
SGAI 0.99070.9820.98470.95990.92690.9040.87130.89370.93040.9664
LVGI 0.96210.76510.77770.77940.7850.97630.96710.98130.98811.0067
TATA -0.0470.17150.12910.120.0983-0.0658-0.0494-0.0409-0.0298-0.0142
M-score -2.50-0.84-1.270.05-0.33-2.03-1.77-2.60-2.49-2.45
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