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GuruFocus has detected 6 Warning Signs with Allergan PLC $AGN.
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Allergan PLC (NYSE:AGN)
Beneish M-Score
-2.01 (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.

Allergan PLC has a M-score of -2.01 signals that the company is a manipulator.

AGN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.49   Max: 3.71
Current: -2.01

-3.49
3.71

During the past 13 years, the highest Beneish M-Score of Allergan PLC was 3.71. The lowest was -3.49. And the median was -2.30.


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 Allergan PLC 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 * 1.2868+0.528 * 0.7745+0.404 * 0.9179+0.892 * 0.819+0.115 * 0.9845
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.104+4.679 * 0.1033-0.327 * 0.8197
=-2.01

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

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $2,531 Mil.
Revenue was 3864.3 + 3622.2 + 3684.8 + 3795.9 = $14,967 Mil.
Gross Profit was 3384.6 + 3160 + 3243.3 + 2984.1 = $12,772 Mil.
Total Current Assets was $17,858 Mil.
Total Assets was $128,986 Mil.
Property, Plant and Equipment(Net PPE) was $1,611 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,631 Mil.
Selling, General & Admin. Expense(SGA) was $4,782 Mil.
Total Current Liabilities was $7,875 Mil.
Long-Term Debt was $29,971 Mil.
Net Income was -0.6 + 15220 + -501.7 + 255.7 = $14,973 Mil.
Non Operating Income was 35 + 33.6 + 150.1 + 0.5 = $219 Mil.
Cash Flow from Operations was -83.3 + -1092.4 + 1382.5 + 1218.5 = $1,425 Mil.
Accounts Receivable was $2,402 Mil.
Revenue was 4197.5 + 4088.9 + 5755 + 4234.2 = $18,276 Mil.
Gross Profit was 3087 + 2846 + 3624.9 + 2520.8 = $12,079 Mil.
Total Current Assets was $8,615 Mil.
Total Assets was $135,841 Mil.
Property, Plant and Equipment(Net PPE) was $1,574 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,995 Mil.
Selling, General & Admin. Expense(SGA) was $5,289 Mil.
Total Current Liabilities was $8,328 Mil.
Long-Term Debt was $40,293 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)
=(2531 / 14967.2) / (2401.6 / 18275.6)
=0.16910311 / 0.13141019
=1.2868

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)
=(12078.7 / 18275.6) / (12772 / 14967.2)
=0.66091948 / 0.85333262
=0.7745

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 - (17857.9 + 1611.3) / 128986.3) / (1 - (8615.4 + 1573.9) / 135840.7)
=0.84905994 / 0.92499082
=0.9179

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
=14967.2 / 18275.6
=0.819

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))
=(5995.3 / (5995.3 + 1573.9)) / (6631 / (6631 + 1611.3))
=0.79206521 / 0.80450845
=0.9845

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)
=(4782.4 / 14967.2) / (5289.4 / 18275.6)
=0.31952536 / 0.28942415
=1.104

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)
=((29970.8 + 7874.7) / 128986.3) / ((40293.4 + 8328.3) / 135840.7)
=0.29340713 / 0.35793175
=0.8197

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
=(14973.4 - 219.2 - 1425.3) / 128986.3
=0.1033

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.

Allergan PLC has a M-score of -2.01 signals that the company is likely to 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.

Allergan PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.55051.12431.540.84891.6170.88492.39910.44060.671.0901
GMI 0.94840.97540.9510.9740.9991.03291.15790.57920.93340.7805
AQI 0.9680.91531.37280.98320.891.22171.1781.17191.07580.9179
SGI 1.26141.01561.10161.27711.28531.29020.441.79693.22270.9668
DEPI 0.88561.30790.9620.70160.79111.37520.71430.43191.14750.9845
SGAI 1.09440.98991.11541.13810.77681.20311.61161.51860.64041.0478
LVGI 0.80260.91761.0480.86151.2511.59010.81460.73240.94020.8197
TATA -0.0836-0.0537-0.0276-0.0729-0.0553-0.043-0.0856-0.0729-0.00280.1033
M-score -3.06-2.59-1.94-2.75-2.03-2.61-2.02-2.84-0.72-2.04

Allergan PLC Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 2.98770.26330.9460.91160.27830.92460.35030.44651.05561.2868
GMI 0.94240.61020.7190.73850.68330.91260.8890.84410.85090.7745
AQI 1.42411.17191.23971.45791.02491.07581.01461.02070.88060.9179
SGI 0.54623.00722.79753.09283.45472.33521.89651.26211.06020.819
DEPI 0.61830.43190.83670.82540.74861.14750.67450.76340.95590.9845
SGAI 1.65311.12511.3471.37520.85690.80570.71610.82140.97171.104
LVGI 0.58830.73240.70620.61130.9330.94020.99210.97920.79920.8197
TATA -0.0577-0.0726-0.031-0.040.0022-0.0027-0.0037-0.00710.07720.1033
M-score -1.21-1.84-1.11-0.79-1.08-1.32-2.33-2.85-2.08-2.01
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