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Arthur J Gallagher & Co (NYSE:AJG)
Beneish M-Score
-1.92 (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 -1.92 signals that the company is a manipulator.

AJG' s 10-Year Beneish M-Score Range
Min: -5.91   Max: 2.15
Current: -1.92

-5.91
2.15

During the past 13 years, the highest Beneish M-Score of Arthur J Gallagher & Co was 2.15. The lowest was -5.91. And the median was -2.53.


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 * 1.0768+0.528 * 1.1202+0.404 * 1.0619+0.892 * 1.4417+0.115 * 0.9667
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9008+4.679 * 0.0007-0.327 * 1.0355
=-1.92

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
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 $694 Mil.
Total Current Liabilities was $3,770 Mil.
Long-Term Debt was $2,125 Mil.
Net Income was 93.6 + 109 + 49.3 + 60 = $312 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 26.4 + 130.7 + 76.1 + 71.3 = $305 Mil.
Accounts Receivable was $1,075 Mil.
Revenue was 835.8 + 779.5 + 674.1 + 673.2 = $2,963 Mil.
Gross Profit was 276.4 + 287.4 + 232.1 + 225 = $1,021 Mil.
Total Current Assets was $2,547 Mil.
Total Assets was $5,970 Mil.
Property, Plant and Equipment(Net PPE) was $148 Mil.
Depreciation, Depletion and Amortization(DDA) was $165 Mil.
Selling, General & Admin. Expense(SGA) was $534 Mil.
Total Current Liabilities was $2,578 Mil.
Long-Term Debt was $825 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)
=(1669 / 4271.3) / (1075.1 / 2962.6)
=0.39074755 / 0.3628907
=1.0768

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)
=(378.8 / 2962.6) / (396 / 4271.3)
=0.34459596 / 0.30761127
=1.1202

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 - (3972.4 + 196.6) / 9988) / (1 - (2546.7 + 148.1) / 5970.2)
=0.58259912 / 0.54862484
=1.0619

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
=4271.3 / 2962.6
=1.4417

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))
=(165 / (165 + 148.1)) / (235.6 / (235.6 + 196.6))
=0.52698818 / 0.545118
=0.9667

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)
=(693.9 / 4271.3) / (534.3 / 2962.6)
=0.1624564 / 0.18034834
=0.9008

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 + 3769.8) / 9988) / ((825 + 2577.9) / 5970.2)
=0.59018823 / 0.56998091
=1.0355

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
=(311.9 - 0 - 304.5) / 9988
=0.0007

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 -1.92 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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.89241.03980.98970.83010.62560.79841.00311.19580.90390.932
GMI 0.97571.21670.93290.98090.95120.94562.21851.00661.00171.0922
AQI 1.27781.01931.16171.21941.34921.10780.99520.98021.07631.059
SGI 1.17680.99441.02881.10421.01341.05121.0781.14511.18061.2616
DEPI 0.78740.83870.63190.86940.93980.88110.93380.98810.97671.0842
SGAI 1.01480.86581.08610.98431.08021.02540.30581.03190.97680.9062
LVGI 0.96491.01340.96451.04280.9330.90210.94981.03630.94111.0383
TATA -0.0851-0.00810.0094-0.0274-0.0255-0.0255-0.016-0.031-0.0277-0.0119
M-score -2.74-2.36-2.44-2.62-2.82-2.71-1.71-2.34-2.48-2.28

Arthur J Gallagher & Co Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.86680.8730.90390.82080.76650.85310.9320.92351.16621.0768
GMI 0.47790.24111.00170.99591.02391.05851.09221.12771.14411.1202
AQI 1.03111.05921.07631.08671.09041.06381.0590.99791.0541.0619
SGI 1.22031.20351.18061.18511.18791.22141.26161.29191.37561.4417
DEPI 0.93940.93290.97670.9641.00751.09431.08421.0841.08160.9667
SGAI 19.5623-2.56640.97680.99070.98060.95820.90620.87610.86490.9008
LVGI 0.93920.91160.94110.95240.96791.01421.03831.08911.0191.0355
TATA -0.012-0.0157-0.0277-0.0449-0.0224-0.0335-0.0119-0.0134-0.0190.0007
M-score -5.91-2.23-2.48-2.64-2.57-2.50-2.28-2.28-1.96-1.92
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