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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 Express Scripts Holding Co was 2.37. The lowest was -3.09. And the median was -2.52.
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 Express Scripts Holding 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 * 1.1402||+||0.528 * 0.9733||+||0.404 * 0.9859||+||0.892 * 1.0153||+||0.115 * 0.9197|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9314||+||4.679 * -0.0506||-||0.327 * 1.1287|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $7,391 Mil.|
Revenue was 25222.6 + 25454.2 + 24899.6 + 26312.6 = $101,889 Mil.
Gross Profit was 2173.5 + 2131.2 + 1834 + 2094 = $8,233 Mil.
Total Current Assets was $10,274 Mil.
Total Assets was $51,997 Mil.
Property, Plant and Equipment(Net PPE) was $1,343 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,312 Mil.
Selling, General & Admin. Expense(SGA) was $4,164 Mil.
Total Current Liabilities was $16,014 Mil.
Long-Term Debt was $14,038 Mil.
Net Income was 661.7 + 600.1 + 441.1 + 581.8 = $2,285 Mil.
Non Operating Income was 0 + 0 + 0 + 18.7 = $19 Mil.
Cash Flow from Operations was 793 + 899.9 + 281.4 + 2924.4 = $4,899 Mil.
|Accounts Receivable was $6,385 Mil.
Revenue was 25778.5 + 25111 + 23685 + 25781.4 = $100,356 Mil.
Gross Profit was 2073 + 2007.7 + 1750.4 + 2061 = $7,892 Mil.
Total Current Assets was $9,705 Mil.
Total Assets was $53,439 Mil.
Property, Plant and Equipment(Net PPE) was $1,640 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,281 Mil.
Selling, General & Admin. Expense(SGA) was $4,404 Mil.
Total Current Liabilities was $15,923 Mil.
Long-Term Debt was $11,442 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)|
|=||(7391.1 / 101889)||/||(6384.5 / 100355.9)|
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)|
|=||(2131.2 / 100355.9)||/||(2173.5 / 101889)|
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 - (10274.4 + 1343.1) / 51996.5)||/||(1 - (9704.7 + 1639.9) / 53439.2)|
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))|
|=||(2281.2 / (2281.2 + 1639.9))||/||(2312.4 / (2312.4 + 1343.1))|
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)|
|=||(4164.4 / 101889)||/||(4403.7 / 100355.9)|
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)|
|=||((14037.7 + 16013.8) / 51996.5)||/||((11442 + 15922.5) / 53439.2)|
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|
|=||(2284.7 - 18.7||-||4898.7)||/||51996.5|
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.
Express Scripts Holding Co has a M-score of -2.63 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
Express Scripts Holding Co Annual Data
Express Scripts Holding Co Quarterly Data