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GuruFocus has detected 5 Warning Signs with GlaxoSmithKline PLC $GSK.
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GlaxoSmithKline PLC (NYSE:GSK)
Beneish M-Score
-2.60 (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.

GlaxoSmithKline PLC has a M-score of -2.84 suggests that the company is not a manipulator.

GSK' s Beneish M-Score Range Over the Past 10 Years
Min: -3.75   Max: -0.01
Current: -2.6

-3.75
-0.01

During the past 13 years, the highest Beneish M-Score of GlaxoSmithKline PLC was -0.01. The lowest was -3.75. And the median was -2.67.


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 GlaxoSmithKline PLC 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 * 1.0141+0.528 * 1.0028+0.404 * 1.0282+0.892 * 1.0224+0.115 * 1.0939
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9214+4.679 * -0.0864-0.327 * 1.0878
=-2.84

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

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $9,528 Mil.
Revenue was 9910.64388962 + 9278.40909091 + 8873.21937322 + 9410.17964072 = $37,472 Mil.
Gross Profit was 6592.6412615 + 6261.36363636 + 5834.75783476 + 5606.28742515 = $24,295 Mil.
Total Current Assets was $23,143 Mil.
Total Assets was $77,250 Mil.
Property, Plant and Equipment(Net PPE) was $14,417 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,041 Mil.
Selling, General & Admin. Expense(SGA) was $12,958 Mil.
Total Current Liabilities was $23,833 Mil.
Long-Term Debt was $20,238 Mil.
Net Income was 1061.760841 + -617.897727273 + 401.709401709 + -529.94011976 = $316 Mil.
Non Operating Income was 7.88436268068 + -2.84090909091 + 0 + -55.3892215569 = $-50 Mil.
Cash Flow from Operations was 2321.94480946 + 1755.68181818 + 716.524216524 + 2247.00598802 = $7,041 Mil.
Accounts Receivable was $9,190 Mil.
Revenue was 9397.2392638 + 9171.33956386 + 8403.58744395 + 9680.75117371 = $36,653 Mil.
Gross Profit was 6016.87116564 + 6048.28660436 + 5260.0896861 + 6505.47730829 = $23,831 Mil.
Total Current Assets was $26,044 Mil.
Total Assets was $81,472 Mil.
Property, Plant and Equipment(Net PPE) was $14,716 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,309 Mil.
Selling, General & Admin. Expense(SGA) was $13,756 Mil.
Total Current Liabilities was $19,555 Mil.
Long-Term Debt was $23,172 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)
=(9528.25229961 / 37472.4519945) / (9190.18404908 / 36652.9174453)
=0.25427352 / 0.2507354
=1.0141

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)
=(23830.7247644 / 36652.9174453) / (24295.0501578 / 37472.4519945)
=0.65017266 / 0.64834429
=1.0028

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 - (23143.2325887 + 14416.5571616) / 77249.6714849) / (1 - (26044.4785276 + 14716.2576687) / 81472.392638)
=0.51378706 / 0.4996988
=1.0282

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
=37472.4519945 / 36652.9174453
=1.0224

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))
=(2309.22104111 / (2309.22104111 + 14716.2576687)) / (2040.60931353 / (2040.60931353 + 14416.5571616))
=0.13563325 / 0.12399518
=1.0939

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)
=(12957.6493022 / 37472.4519945) / (13756.0424408 / 36652.9174453)
=0.34579134 / 0.37530553
=0.9214

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)
=((20237.8449409 + 23833.1143233) / 77249.6714849) / ((23171.7791411 + 19555.2147239) / 81472.392638)
=0.57050028 / 0.52443524
=1.0878

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
=(315.632395675 - -50.3457679671 - 7041.15683219) / 77249.6714849
=-0.0864

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.

GlaxoSmithKline PLC has a M-score of -2.84 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 local exchange's currency.

GlaxoSmithKline PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.28971.06360.88950.72750.9740.96010.96111.0331.03411.4024
GMI 1.01751.04650.99561.0251.00281.02811.03560.99181.08220.9446
AQI 1.03211.0251.17551.09350.9691.16480.93240.97391.22221.05
SGI 1.0050.78931.27270.96180.96311.0011.01760.82860.99470.9722
DEPI 1.05111.02430.790.91231.11910.98961.02840.9760.97630.9822
SGAI 0.96031.04771.07551.32780.69511.06550.96211.12031.07670.8702
LVGI 1.19231.14120.97931.04131.01351.03671.0081.03540.75031.0595
TATA -0.0237-0.0673-0.0581-0.1244-0.03880.0037-0.0492-0.05940.0941-0.0946
M-score -2.35-2.94-2.57-3.38-2.67-2.44-2.73-2.93-1.81-2.59

GlaxoSmithKline PLC Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.05790.94851.04591.07781.16541.06341.01620.99731.01411.3217
GMI 1.0350.99041.01021.01731.03141.08191.0461.02721.00280.9452
AQI 0.8980.97391.06581.14391.21221.22221.10671.07061.02821.05
SGI 0.94940.90240.88970.90250.93380.96741.00441.01391.02241.0316
DEPI 2.32610.87651.0660.81680.70281.00370.7931.19881.09390.9386
SGAI 1.08041.1211.12981.14981.08031.07651.01760.91220.92140.87
LVGI 1.03441.03540.78480.76910.73160.75031.01861.08771.08781.0595
TATA -0.0303-0.06090.07850.08130.10350.0939-0.0393-0.0649-0.0864-0.0999
M-score -2.51-2.96-2.08-2.02-1.76-1.81-2.61-2.72-2.84-2.64
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