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Arthur J Gallagher & Co (NYSE:AJG)
Beneish M-Score
-2.07 (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 -2.07 signals that the company is a manipulator.

AJG' s 10-Year Beneish M-Score Range
Min: -2.93   Max: 3.01
Current: -2.07

-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 -2.51.


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 * 0.9751+0.528 * 1.0848+0.404 * 1.1364+0.892 * 1.4451+0.115 * 0.8968
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9922+4.679 * -0.016-0.327 * 0.933
=-2.07

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

This Year (Mar15) TTM:Last Year (Mar14) TTM:
Accounts Receivable was $1,766 Mil.
Revenue was 1231.3 + 1245.4 + 1286.8 + 1179.3 = $4,943 Mil.
Gross Profit was 346.8 + 347.5 + 396 + 378.8 = $1,469 Mil.
Total Current Assets was $3,595 Mil.
Total Assets was $9,731 Mil.
Property, Plant and Equipment(Net PPE) was $191 Mil.
Depreciation, Depletion and Amortization(DDA) was $282 Mil.
Selling, General & Admin. Expense(SGA) was $814 Mil.
Total Current Liabilities was $3,439 Mil.
Long-Term Debt was $2,125 Mil.
Net Income was 21.9 + 51.5 + 93.6 + 109 = $276 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 113.3 + 169.1 + 26.4 + 122.7 = $432 Mil.
Accounts Receivable was $1,253 Mil.
Revenue was 915 + 890.2 + 835.8 + 779.5 = $3,421 Mil.
Gross Profit was 277.7 + 261.4 + 276.4 + 287.4 = $1,103 Mil.
Total Current Assets was $3,198 Mil.
Total Assets was $7,276 Mil.
Property, Plant and Equipment(Net PPE) was $166 Mil.
Depreciation, Depletion and Amortization(DDA) was $191 Mil.
Selling, General & Admin. Expense(SGA) was $567 Mil.
Total Current Liabilities was $3,034 Mil.
Long-Term Debt was $1,425 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)
=(1766.1 / 4942.8) / (1253.4 / 3420.5)
=0.3573076 / 0.36643766
=0.9751

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)
=(347.5 / 3420.5) / (346.8 / 4942.8)
=0.32243824 / 0.2972202
=1.0848

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 - (3594.8 + 190.6) / 9730.9) / (1 - (3198 + 165.9) / 7275.6)
=0.61099179 / 0.53764638
=1.1364

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
=4942.8 / 3420.5
=1.4451

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))
=(191.1 / (191.1 + 165.9)) / (282.2 / (282.2 + 190.6))
=0.53529412 / 0.59686971
=0.8968

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)
=(813.5 / 4942.8) / (567.4 / 3420.5)
=0.16458283 / 0.16588218
=0.9922

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 + 3438.7) / 9730.9) / ((1425 + 3033.6) / 7275.6)
=0.57175595 / 0.61281544
=0.933

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
=(276 - 0 - 431.5) / 9730.9
=-0.016

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 -2.07 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 own currency.

Arthur J Gallagher & Co Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.03980.98970.83010.62560.79841.00311.19580.90390.9320.7799
GMI 1.21670.93290.98090.95122.01111.04311.00661.00171.09221.0989
AQI 1.01931.16171.21941.34921.10780.99520.98021.07631.0591.0758
SGI 0.99441.02881.10421.01341.05121.0781.14511.18061.26161.4551
DEPI 0.83870.63190.86940.93980.88110.93380.98810.97671.08420.9245
SGAI 0.86581.08610.98431.08020.31580.99291.03190.97680.90620.9545
LVGI 1.01340.96451.04280.9330.90210.94981.03630.94111.03830.9618
TATA -0.00810.0094-0.0274-0.0255-0.0255-0.0154-0.0312-0.0277-0.0119-0.0099
M-score -2.36-2.44-2.62-2.82-2.03-2.45-2.34-2.48-2.28-2.23

Arthur J Gallagher & Co Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
DSRI 0.90390.82080.76650.85310.9320.92351.16621.07680.77990.9751
GMI 1.00170.99591.02391.06261.09221.12771.14411.12021.09891.0848
AQI 1.07631.08671.09041.06381.0590.99791.0541.06191.07581.1364
SGI 1.18061.18511.18791.22141.26161.29191.37561.44171.45511.4451
DEPI 0.97670.9641.00751.09431.08421.0841.08160.96670.92450.8968
SGAI 0.97680.99070.98060.95120.90620.86340.85320.88990.9440.9922
LVGI 0.94110.95240.96791.01421.03831.08911.0191.03550.96180.933
TATA -0.0277-0.0452-0.0224-0.0335-0.0119-0.0145-0.0190.0007-0.0099-0.016
M-score -2.48-2.65-2.57-2.50-2.28-2.29-1.95-1.92-2.23-2.07
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