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Arthur J Gallagher & Co (NYSE:AJG)
Beneish M-Score
-2.28 (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 -2.28 suggests that the company is not a manipulator.

AJG' s 10-Year Beneish M-Score Range
Min: -2.93   Max: 3.01
Current: -2.28

-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 -2.56.


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 * 0.9235+0.528 * 1.1289+0.404 * 0.9979+0.892 * 1.2919+0.115 * 1.084
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8819+4.679 * -0.0134-0.327 * 1.0891
=-2.28

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

This Year (Mar14) TTM:Last Year (Mar13) TTM:
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 + 702.9 = $1,518 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 $854 Mil.
Total Current Liabilities was $3,034 Mil.
Long-Term Debt was $1,425 Mil.
Net Income was 49.3 + 60 + 74.6 + 93.5 = $277 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 76.1 + 71.3 + 204.8 + 22.6 = $375 Mil.
Accounts Receivable was $1,051 Mil.
Revenue was 674.1 + 673.2 + 650.4 + 649.9 = $2,648 Mil.
Gross Profit was 232.1 + 225 + 248.8 + 620.9 = $1,327 Mil.
Total Current Assets was $2,301 Mil.
Total Assets was $5,225 Mil.
Property, Plant and Equipment(Net PPE) was $109 Mil.
Depreciation, Depletion and Amortization(DDA) was $150 Mil.
Selling, General & Admin. Expense(SGA) was $749 Mil.
Total Current Liabilities was $2,215 Mil.
Long-Term Debt was $725 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)
=(1253.4 / 3420.5) / (1050.6 / 2647.6)
=0.36643766 / 0.39681221
=0.9235

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)
=(261.4 / 2647.6) / (277.7 / 3420.5)
=0.5011331 / 0.44391171
=1.1289

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 - (3198 + 165.9) / 7275.6) / (1 - (2301.4 + 108.5) / 5225.1)
=0.53764638 / 0.53878395
=0.9979

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
=3420.5 / 2647.6
=1.2919

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))
=(150 / (150 + 108.5)) / (191.1 / (191.1 + 165.9))
=0.58027079 / 0.53529412
=1.084

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)
=(853.5 / 3420.5) / (749.1 / 2647.6)
=0.24952492 / 0.28293549
=0.8819

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)
=((1425 + 3033.6) / 7275.6) / ((725 + 2215.1) / 5225.1)
=0.61281544 / 0.5626878
=1.0891

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
=(277.4 - 0 - 374.8) / 7275.6
=-0.0134

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 -2.28 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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.89241.03980.98970.83010.62560.79841.00311.19580.90390.932
GMI 0.97571.21670.93290.98090.95122.01111.04311.00661.00171.0922
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 1.01480.86581.08610.98431.08020.31580.99291.03190.97680.9062
LVGI 0.96491.01340.96451.04280.9330.90210.94981.03630.94111.0383
TATA -0.0851-0.00810.0094-0.0274-0.0255-0.0255-0.0154-0.0312-0.0277-0.0119
M-score -2.74-2.36-2.44-2.62-2.82-2.03-2.45-2.34-2.48-2.28

Arthur J Gallagher & Co Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 1.19581.23030.86680.8730.90390.82080.76650.85310.9320.9235
GMI 1.00661.02480.70470.71020.71660.72261.0291.06481.09591.1289
AQI 0.98020.98291.03111.05921.07631.08671.09041.06381.0590.9979
SGI 1.14511.22141.22031.20351.18061.18511.18791.22141.26161.2919
DEPI 0.98810.97840.93940.93290.97670.9641.00751.09431.08421.084
SGAI 0.68320.96561.45481.40591.46271.45880.97780.94930.90930.8819
LVGI 1.03631.00940.93920.91160.94110.95240.96791.01421.03831.0891
TATA -0.0312-0.0186-0.0124-0.0151-0.0277-0.0452-0.0224-0.0335-0.0119-0.0134
M-score -2.28-2.15-2.67-2.66-2.72-2.87-2.57-2.50-2.28-2.28
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