Switch to:
Arthur J Gallagher & Co (NYSE:AJG)
Beneish M-Score
-2.41 (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.

Arthur J Gallagher & Co has a M-score of -2.41 suggests that the company is not a manipulator.

AJG' s 10-Year Beneish M-Score Range
Min: -2.93   Max: 3.01
Current: -2.41

-2.93
3.01

During the past 13 years, the highest Beneish M-Score of Arthur J Gallagher & Co was 3.01. The lowest was -2.93. And the median was -2.50.


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 Arthur J Gallagher & Co 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 * 0.6572+0.528 * 1.0425+0.404 * 1.0862+0.892 * 1.3441+0.115 * 0.8539
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0224+4.679 * 0.0042-0.327 * 0.9397
=-2.41

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun15) TTM:Last Year (Jun14) TTM:
Accounts Receivable was $1,765 Mil.
Revenue was 1371.4 + 1231.3 + 1245.4 + 1286.8 = $5,135 Mil.
Gross Profit was 449.5 + 346.8 + 347.5 + 396 = $1,540 Mil.
Total Current Assets was $4,261 Mil.
Total Assets was $10,716 Mil.
Property, Plant and Equipment(Net PPE) was $198 Mil.
Depreciation, Depletion and Amortization(DDA) was $305 Mil.
Selling, General & Admin. Expense(SGA) was $837 Mil.
Total Current Liabilities was $3,905 Mil.
Long-Term Debt was $2,125 Mil.
Net Income was 139.3 + 21.9 + 51.5 + 93.6 = $306 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -31.6 + 113.3 + 169.1 + 10.4 = $261 Mil.
Accounts Receivable was $1,998 Mil.
Revenue was 1179.3 + 915 + 890.2 + 835.8 = $3,820 Mil.
Gross Profit was 378.8 + 277.7 + 261.4 + 276.4 = $1,194 Mil.
Total Current Assets was $4,440 Mil.
Total Assets was $10,019 Mil.
Property, Plant and Equipment(Net PPE) was $194 Mil.
Depreciation, Depletion and Amortization(DDA) was $208 Mil.
Selling, General & Admin. Expense(SGA) was $609 Mil.
Total Current Liabilities was $3,875 Mil.
Long-Term Debt was $2,125 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)
=(1764.5 / 5134.9) / (1997.6 / 3820.3)
=0.34362889 / 0.52289087
=0.6572

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)
=(346.8 / 3820.3) / (449.5 / 5134.9)
=0.31261943 / 0.29986952
=1.0425

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 - (4261.4 + 198.2) / 10716.1) / (1 - (4440.3 + 193.7) / 10019.3)
=0.58384114 / 0.53749264
=1.0862

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
=5134.9 / 3820.3
=1.3441

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))
=(207.8 / (207.8 + 193.7)) / (305 / (305 + 198.2))
=0.51755915 / 0.60612083
=0.8539

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)
=(836.6 / 5134.9) / (608.8 / 3820.3)
=0.1629243 / 0.15935921
=1.0224

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)
=((2125 + 3905.4) / 10716.1) / ((2125 + 3875) / 10019.3)
=0.56274204 / 0.59884423
=0.9397

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
=(306.3 - 0 - 261.2) / 10716.1
=0.0042

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.

Arthur J Gallagher & Co has a M-score of -2.41 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 own currency.

Arthur J Gallagher & Co Annual Data

Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14
DSRI
GMI
AQI
SGI
DEPI
SGAI
LVGI
TATA
M-score

Arthur J Gallagher & Co Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
DSRI 0.82080.76650.85310.9320.92351.16621.07680.77990.97510.6572
GMI 0.99591.02391.06261.09221.12771.14411.12021.09891.08481.0425
AQI 1.08671.09041.06381.0590.99791.0541.06191.07581.13641.0862
SGI 1.18511.18791.22141.26161.29191.37561.44171.45511.44511.3441
DEPI 0.9641.00751.09431.08421.0841.08160.96670.92450.89680.8539
SGAI 0.99070.98060.95120.90620.86340.84650.88370.93810.98631.0224
LVGI 0.95240.96791.01421.03831.08911.0191.03550.96180.9330.9397
TATA -0.0452-0.0224-0.0335-0.0119-0.0145-0.02060.0007-0.0099-0.0160.0042
M-score -2.65-2.57-2.50-2.28-2.29-1.96-1.92-2.23-2.07-2.41
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GuruFocus Premium Plus Membership

FEEDBACK