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Arthur J Gallagher & Co (NYSE:AJG)
Beneish M-Score
-2.44 (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 -2.44 suggests that the company is not a manipulator.

AJG' s Beneish M-Score Range Over the Past 10 Years
Min: -2.96   Max: -0.71
Current: -2.44

-2.96
-0.71

During the past 13 years, the highest Beneish M-Score of Arthur J Gallagher & Co was -0.71. The lowest was -2.96. And the median was -2.49.


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 * 0.8377+0.528 * 1.0358+0.404 * 1.0272+0.892 * 1.2415+0.115 * 0.8935
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.03+4.679 * -0.0119-0.327 * 0.9438
=-2.44

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

This Year (Sep15) TTM:Last Year (Sep14) TTM:
Accounts Receivable was $1,736 Mil.
Revenue was 1454.8 + 1371.4 + 1231.3 + 1245.4 = $5,303 Mil.
Gross Profit was 431 + 449.5 + 346.8 + 347.5 = $1,575 Mil.
Total Current Assets was $4,020 Mil.
Total Assets was $10,510 Mil.
Property, Plant and Equipment(Net PPE) was $201 Mil.
Depreciation, Depletion and Amortization(DDA) was $314 Mil.
Selling, General & Admin. Expense(SGA) was $861 Mil.
Total Current Liabilities was $3,729 Mil.
Long-Term Debt was $2,125 Mil.
Net Income was 133.3 + 139.3 + 21.9 + 51.5 = $346 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 244.8 + -31.6 + 113.3 + 144.1 = $471 Mil.
Accounts Receivable was $1,669 Mil.
Revenue was 1286.8 + 1179.3 + 915 + 890.2 = $4,271 Mil.
Gross Profit was 396 + 378.8 + 277.7 + 261.4 = $1,314 Mil.
Total Current Assets was $3,972 Mil.
Total Assets was $9,988 Mil.
Property, Plant and Equipment(Net PPE) was $197 Mil.
Depreciation, Depletion and Amortization(DDA) was $236 Mil.
Selling, General & Admin. Expense(SGA) was $673 Mil.
Total Current Liabilities was $3,770 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)
=(1735.8 / 5302.9) / (1669 / 4271.3)
=0.32733033 / 0.39074755
=0.8377

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)
=(449.5 / 4271.3) / (431 / 5302.9)
=0.30761127 / 0.29696958
=1.0358

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 - (4020.1 + 200.7) / 10510.4) / (1 - (3972.4 + 196.6) / 9988)
=0.59841681 / 0.58259912
=1.0272

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
=5302.9 / 4271.3
=1.2415

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))
=(235.6 / (235.6 + 196.6)) / (314 / (314 + 200.7))
=0.545118 / 0.61006412
=0.8935

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)
=(860.6 / 5302.9) / (673 / 4271.3)
=0.16228856 / 0.15756327
=1.03

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 + 3729.2) / 10510.4) / ((2125 + 3769.8) / 9988)
=0.55699117 / 0.59018823
=0.9438

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
=(346 - 0 - 470.6) / 10510.4
=-0.0119

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 -2.44 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

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

Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15
DSRI 0.76650.85310.9320.92351.16621.07680.77990.97510.65720.8377
GMI 1.02391.06261.09221.12771.14411.12021.09891.08481.04251.0358
AQI 1.09041.06381.0590.99791.0541.06191.07581.13641.08621.0272
SGI 1.18791.22141.26161.29191.37561.44171.45511.44511.34411.2415
DEPI 1.00751.09431.08421.0841.08160.96670.92450.89680.85390.8935
SGAI 0.98060.95120.90620.86340.84650.87370.95451.00241.03851.03
LVGI 0.96791.01421.03831.08911.0191.03550.96180.9330.93970.9438
TATA -0.0224-0.0335-0.0119-0.0145-0.0206-0.0018-0.0099-0.0160.0042-0.0119
M-score -2.57-2.50-2.28-2.29-1.96-1.93-2.23-2.07-2.42-2.44
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