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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.
During the past 13 years, the highest Beneish M-Score of Alexion Pharmaceuticals Inc was 38.17. The lowest was -4.58. And the median was -2.50.
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 Alexion Pharmaceuticals Inc 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 * 0.7128||+||0.528 * 0.9603||+||0.404 * 0.8609||+||0.892 * 1.4399||+||0.115 * 1.1683|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8937||+||4.679 * 0.0045||-||0.327 * 0.8403|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $433 Mil.|
Revenue was 599.476 + 555.146 + 512.495 + 566.616 = $2,234 Mil.
Gross Profit was 550.037 + 503.288 + 472.869 + 533.677 = $2,060 Mil.
Total Current Assets was $2,796 Mil.
Total Assets was $4,202 Mil.
Property, Plant and Equipment(Net PPE) was $392 Mil.
Depreciation, Depletion and Amortization(DDA) was $47 Mil.
Selling, General & Admin. Expense(SGA) was $630 Mil.
Total Current Liabilities was $607 Mil.
Long-Term Debt was $117 Mil.
Net Income was 153.332 + 177.731 + 166.495 + 159.354 = $657 Mil.
Non Operating Income was -0.001 + -2.045 + -1.202 + 1.258 = $-2 Mil.
Cash Flow from Operations was 283.459 + 281.521 + 106.15 + -31.055 = $640 Mil.
|Accounts Receivable was $422 Mil.
Revenue was 441.909 + 400.405 + 370.091 + 338.941 = $1,551 Mil.
Gross Profit was 390.357 + 349.047 + 330.714 + 303.672 = $1,374 Mil.
Total Current Assets was $2,187 Mil.
Total Assets was $3,318 Mil.
Property, Plant and Equipment(Net PPE) was $201 Mil.
Depreciation, Depletion and Amortization(DDA) was $29 Mil.
Selling, General & Admin. Expense(SGA) was $490 Mil.
Total Current Liabilities was $582 Mil.
Long-Term Debt was $97 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(432.888 / 2233.733)||/||(421.752 / 1551.346)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(503.288 / 1551.346)||/||(550.037 / 2233.733)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (2796.029 + 392.248) / 4201.962)||/||(1 - (2186.857 + 201.109) / 3317.696)|
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.
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))|
|=||(28.693 / (28.693 + 201.109))||/||(46.939 / (46.939 + 392.248))|
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)|
|=||(630.209 / 2233.733)||/||(489.72 / 1551.346)|
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)|
|=||((116.599 + 606.74) / 4201.962)||/||((97.23 + 582.429) / 3317.696)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(656.912 - -1.99||-||640.075)||/||4201.962|
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.
Alexion Pharmaceuticals Inc has a M-score of -2.32 suggests that the company will not be a manipulator.
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
Alexion Pharmaceuticals Inc Annual Data
Alexion Pharmaceuticals Inc Quarterly Data