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GuruFocus has detected 2 Warning Signs with Genomic Health Inc $GHDX.
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Genomic Health Inc (NAS:GHDX)
Beneish M-Score
-1.75 (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.

Genomic Health Inc has a M-score of -1.75 signals that the company is a manipulator.

GHDX' s Beneish M-Score Range Over the Past 10 Years
Min: -3.27   Max: -1.67
Current: -1.75

-3.27
-1.67

During the past 13 years, the highest Beneish M-Score of Genomic Health Inc was -1.67. The lowest was -3.27. And the median was -2.57.


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 Genomic Health 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 * 0.8299+0.528 * 0.9849+0.404 * 4.5215+0.892 * 1.1406+0.115 * 0.9233
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9397+4.679 * -0.1484-0.327 * 0.8858
=-1.75

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $35.2 Mil.
Revenue was 82.742 + 82.258 + 81.974 + 80.894 = $327.9 Mil.
Gross Profit was 69.562 + 69.196 + 66.753 + 65.094 = $270.6 Mil.
Total Current Assets was $146.0 Mil.
Total Assets was $201.1 Mil.
Property, Plant and Equipment(Net PPE) was $45.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $8.9 Mil.
Selling, General & Admin. Expense(SGA) was $216.4 Mil.
Total Current Liabilities was $41.2 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 1.352 + -2.82 + -6.1 + -6.351 = $-13.9 Mil.
Non Operating Income was 0.641 + -0.111 + 0.526 + 1.42 = $2.5 Mil.
Cash Flow from Operations was 2.815 + 8.796 + 7.194 + -5.349 = $13.5 Mil.
Accounts Receivable was $37.2 Mil.
Revenue was 75.133 + 73.554 + 70.619 + 68.152 = $287.5 Mil.
Gross Profit was 60.864 + 59.836 + 57.586 + 55.39 = $233.7 Mil.
Total Current Assets was $143.0 Mil.
Total Assets was $184.6 Mil.
Property, Plant and Equipment(Net PPE) was $39.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.1 Mil.
Selling, General & Admin. Expense(SGA) was $201.9 Mil.
Total Current Liabilities was $42.7 Mil.
Long-Term Debt was $0.0 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)
=(35.179 / 327.868) / (37.164 / 287.458)
=0.10729623 / 0.12928497
=0.8299

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)
=(233.676 / 287.458) / (270.605 / 327.868)
=0.81290484 / 0.8253474
=0.9849

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 - (145.964 + 45.688) / 201.114) / (1 - (142.95 + 39.746) / 184.617)
=0.04704794 / 0.01040533
=4.5215

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
=327.868 / 287.458
=1.1406

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))
=(7.069 / (7.069 + 39.746)) / (8.933 / (8.933 + 45.688))
=0.15099861 / 0.16354516
=0.9233

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)
=(216.428 / 327.868) / (201.934 / 287.458)
=0.66010712 / 0.70248175
=0.9397

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)
=((0 + 41.175) / 201.114) / ((0 + 42.672) / 184.617)
=0.20473463 / 0.23113798
=0.8858

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
=(-13.919 - 2.476 - 13.456) / 201.114
=-0.1484

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.

Genomic Health Inc has a M-score of -1.75 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 local exchange's currency.

Genomic Health Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.24531.0020.93391.081.27310.92531.18961.12511.02090.8299
GMI 0.90550.96710.96410.97110.96370.9921.00421.01931.01270.9849
AQI 0.6930.91531.12542.27951.241.92171.26761.07610.12454.5215
SGI 2.19471.72711.35241.19091.15731.1411.11241.05391.04261.1406
DEPI 0.78681.13830.71910.82690.93891.56121.08781.07451.58360.9233
SGAI 0.66180.77070.92780.98431.00910.99261.06861.08321.0150.9397
LVGI 0.64881.23211.03460.91630.93960.90171.02231.22371.12090.8858
TATA -0.0976-0.1762-0.1616-0.156-0.1017-0.1148-0.1158-0.1405-0.1136-0.1484
M-score -1.67-2.73-2.98-2.45-2.48-2.49-2.65-3.01-3.28-1.75

Genomic Health Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.11241.12511.16071.01791.06661.02091.02370.90830.87690.8299
GMI 1.01111.01931.01381.0161.01711.01271.01321.00970.99680.9849
AQI 1.66261.07610.09790.10290.10380.12451.19991.37374.56534.5215
SGI 1.08771.05391.04281.01731.0221.04261.08431.12481.13791.1406
DEPI 0.94121.07451.24321.44691.66771.58361.33081.12490.90640.9233
SGAI 1.10671.10111.07451.06231.02850.99850.97840.94360.94720.9397
LVGI 1.14381.22371.1631.11711.3031.12090.99931.07050.93820.8858
TATA -0.1381-0.1405-0.1021-0.1046-0.1483-0.1136-0.1213-0.1623-0.1459-0.1484
M-score -2.74-3.02-3.17-3.29-3.47-3.27-2.82-3.06-1.70-1.75
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