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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 2.22. The lowest was -2.93. And the median was -2.49.
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 * 1.5338||+||0.528 * 0.9945||+||0.404 * 0.9552||+||0.892 * 0.9691||+||0.115 * 1.0169|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9737||+||4.679 * -0.0476||-||0.327 * 1.0899|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $5,980 Mil.|
Revenue was 26312.6 + 25778.5 + 25111 + 23685 = $100,887 Mil.
Gross Profit was 2094 + 2073 + 2007.7 + 1750.4 = $7,925 Mil.
Total Current Assets was $10,568 Mil.
Total Assets was $53,799 Mil.
Property, Plant and Equipment(Net PPE) was $1,584 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,243 Mil.
Selling, General & Admin. Expense(SGA) was $4,323 Mil.
Total Current Liabilities was $17,017 Mil.
Long-Term Debt was $11,013 Mil.
Net Income was 581.8 + 582.3 + 515.2 + 328.3 = $2,008 Mil.
Non Operating Income was 5.1 + 7.2 + 4.7 + 1.7 = $19 Mil.
Cash Flow from Operations was 2924.4 + 435.1 + 735.5 + 454 = $4,549 Mil.
|Accounts Receivable was $4,023 Mil.
Revenue was 25781.4 + 25915.6 + 26381.9 + 26019.9 = $104,099 Mil.
Gross Profit was 2061 + 1994.2 + 2115.1 + 1962.1 = $8,132 Mil.
Total Current Assets was $8,491 Mil.
Total Assets was $53,548 Mil.
Property, Plant and Equipment(Net PPE) was $1,659 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,447 Mil.
Selling, General & Admin. Expense(SGA) was $4,581 Mil.
Total Current Liabilities was $13,235 Mil.
Long-Term Debt was $12,363 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)|
|=||(5979.8 / 100887.1)||/||(4022.9 / 104098.8)|
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)|
|=||(2073 / 104098.8)||/||(2094 / 100887.1)|
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 - (10568.1 + 1584) / 53798.9)||/||(1 - (8491.4 + 1658.9) / 53548.2)|
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))|
|=||(2447 / (2447 + 1658.9))||/||(2242.9 / (2242.9 + 1584))|
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)|
|=||(4322.7 / 100887.1)||/||(4580.7 / 104098.8)|
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)|
|=||((11012.7 + 17016.9) / 53798.9)||/||((12363 + 13235.3) / 53548.2)|
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|
|=||(2007.6 - 18.7||-||4549)||/||53798.9|
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 -2.28 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