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GuruFocus has detected 9 Warning Signs with HCP Inc $HCP.
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HCP Inc (NYSE:HCP)
Beneish M-Score
-2.93 (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.

HCP Inc has a M-score of -2.93 suggests that the company is not a manipulator.

HCP' s Beneish M-Score Range Over the Past 10 Years
Min: -3.3   Max: -0.71
Current: -2.93

-3.3
-0.71

During the past 13 years, the highest Beneish M-Score of HCP Inc was -0.71. The lowest was -3.30. And the median was -2.56.


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 HCP 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 * 0.8406+0.528 * 1.0493+0.404 * 0.6317+0.892 * 1.0969+0.115 * 0.7011
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9843+4.679 * -0.0393-0.327 * 1.1426
=-2.93

* 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 $45 Mil.
Revenue was 172.238 + 654.27 + 662.176 + 640.782 = $2,129 Mil.
Gross Profit was -20.334 + 465.523 + 482.051 + 463.827 = $1,391 Mil.
Total Current Assets was $182 Mil.
Total Assets was $15,759 Mil.
Property, Plant and Equipment(Net PPE) was $11,326 Mil.
Depreciation, Depletion and Amortization(DDA) was $572 Mil.
Selling, General & Admin. Expense(SGA) was $104 Mil.
Total Current Liabilities was $567 Mil.
Long-Term Debt was $9,189 Mil.
Net Income was 58.661 + 151.25 + 301.717 + 116.119 = $628 Mil.
Non Operating Income was -19.911 + -19.037 + 89.107 + -16.807 = $33 Mil.
Cash Flow from Operations was 215.499 + 331.72 + 398.295 + 268.617 = $1,214 Mil.
Accounts Receivable was $49 Mil.
Revenue was 65.585 + 657.499 + 607.532 + 610.791 = $1,941 Mil.
Gross Profit was -103.206 + 483.984 + 471.19 + 478.76 = $1,331 Mil.
Total Current Assets was $435 Mil.
Total Assets was $21,450 Mil.
Property, Plant and Equipment(Net PPE) was $11,854 Mil.
Depreciation, Depletion and Amortization(DDA) was $414 Mil.
Selling, General & Admin. Expense(SGA) was $96 Mil.
Total Current Liabilities was $553 Mil.
Long-Term Debt was $11,069 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)
=(45.116 / 2129.466) / (48.929 / 1941.407)
=0.02118653 / 0.02520286
=0.8406

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)
=(1330.728 / 1941.407) / (1391.067 / 2129.466)
=0.68544514 / 0.65324687
=1.0493

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 - (182.106 + 11325.83) / 15759.265) / (1 - (435.461 + 11854.242) / 21449.849)
=0.26976696 / 0.42704944
=0.6317

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
=2129.466 / 1941.407
=1.0969

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))
=(413.777 / (413.777 + 11854.242)) / (572.4 / (572.4 + 11325.83))
=0.0337281 / 0.048108
=0.7011

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)
=(103.611 / 2129.466) / (95.965 / 1941.407)
=0.04865586 / 0.04943064
=0.9843

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)
=((9189.495 + 566.541) / 15759.265) / ((11069.003 + 553.116) / 21449.849)
=0.61906669 / 0.54182754
=1.1426

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
=(627.747 - 33.352 - 1214.131) / 15759.265
=-0.0393

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.

HCP Inc has a M-score of -2.93 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.

HCP Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.8530.5931.29720.7310.5661.15360.72081.69561.13580.8403
GMI 1.03430.96920.9931.00940.95361.02380.99151.11851.11931.0491
AQI 0.6890.91051.11080.93631.73260.92471.06130.96030.98290.6317
SGI 1.69631.27090.99631.07951.36621.10951.1170.77951.18551.0973
DEPI 0.91460.87021.00751.00870.93311.12560.85111.13161.00190.7011
SGAI 0.85440.84781.06870.98010.84690.64191.34841.0180.990.9839
LVGI 1.50490.8140.97720.76251.21830.98790.99071.06641.12761.1426
TATA 0.01-0.0014-0.02190.0078-0.0056-0.0091-0.0055-0.0124-0.0789-0.0393
M-score -2.20-2.60-2.27-2.56-2.36-2.22-2.71-2.06-2.54-2.93

HCP Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.20241.69561.73551.67731.70861.13520.98130.99820.75680.8406
GMI 1.01161.11851.15111.1851.22661.11911.11651.10461.07071.0493
AQI 1.02950.96030.96090.92280.89750.98290.90761.03491.03560.6317
SGI 1.05510.77950.81070.8350.84351.18611.14771.13251.09351.0969
DEPI 0.9371.13161.11711.23131.2411.00190.98060.84020.86040.7011
SGAI 0.68281.0181.02271.1021.48330.98950.98370.86221.02180.9843
LVGI 1.03221.06641.11571.16561.13291.12761.09771.0251.0371.1426
TATA -0.0052-0.0124-0.0351-0.0352-0.041-0.0788-0.0651-0.0659-0.0668-0.0393
M-score -2.21-2.06-2.10-2.15-2.18-2.54-2.68-2.61-2.91-2.93
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