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HCP Inc (NYSE:HCP)
Beneish M-Score
7.09 (As of Today)

Warning Sign:

Beneish M-Score 7.09 higher than -2.22, which implies that it might have manipulated its financial results.

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 7.09 signals that the company is a manipulator.

HCP' s 10-Year Beneish M-Score Range
Min: -3.7   Max: 25.55
Current: 7.09

-3.7
25.55

During the past 13 years, the highest Beneish M-Score of HCP Inc was 25.55. The lowest was -3.70. And the median was -2.51.


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 * 11.4403+0.528 * 0.9964+0.404 * 0.9705+0.892 * 1.0731+0.115 * 0.9195
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2014+4.679 * -0.0092-0.327 * 0.9885
=7.09

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $408 Mil.
Revenue was 536.121 + 529.992 + 536.586 + 543.958 = $2,147 Mil.
Gross Profit was 457.254 + 454.285 + 463.286 + 467.389 = $1,842 Mil.
Total Current Assets was $497 Mil.
Total Assets was $20,144 Mil.
Property, Plant and Equipment(Net PPE) was $10,815 Mil.
Depreciation, Depletion and Amortization(DDA) was $433 Mil.
Selling, General & Admin. Expense(SGA) was $115 Mil.
Total Current Liabilities was $407 Mil.
Long-Term Debt was $8,674 Mil.
Net Income was 218.885 + 259.111 + 293.095 + 233.756 = $1,005 Mil.
Non Operating Income was 0.709 + 1.93 + 1.329 + 1.584 = $6 Mil.
Cash Flow from Operations was 360.524 + 247.181 + 305.307 + 272.078 = $1,185 Mil.
Accounts Receivable was $33 Mil.
Revenue was 512.239 + 511.186 + 508.971 + 468.066 = $2,000 Mil.
Gross Profit was 438.352 + 438.5 + 438.289 + 395.413 = $1,711 Mil.
Total Current Assets was $131 Mil.
Total Assets was $20,052 Mil.
Property, Plant and Equipment(Net PPE) was $10,861 Mil.
Depreciation, Depletion and Amortization(DDA) was $399 Mil.
Selling, General & Admin. Expense(SGA) was $89 Mil.
Total Current Liabilities was $378 Mil.
Long-Term Debt was $8,767 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)
=(408.436 / 2146.657) / (33.27 / 2000.462)
=0.19026607 / 0.01663116
=11.4403

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)
=(454.285 / 2000.462) / (457.254 / 2146.657)
=0.85507948 / 0.85817809
=0.9964

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 - (496.835 + 10814.881) / 20144.169) / (1 - (131.337 + 10861.424) / 20051.793)
=0.43846202 / 0.45178164
=0.9705

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
=2146.657 / 2000.462
=1.0731

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))
=(398.818 / (398.818 + 10861.424)) / (433.29 / (433.29 + 10814.881))
=0.03541824 / 0.03852093
=0.9195

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)
=(115.032 / 2146.657) / (89.229 / 2000.462)
=0.05358658 / 0.0446042
=1.2014

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)
=((8674.029 + 407.12) / 20144.169) / ((8766.901 + 377.769) / 20051.793)
=0.45080782 / 0.45605248
=0.9885

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
=(1004.847 - 5.552 - 1185.09) / 20144.169
=-0.0092

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 7.09 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 own currency.

HCP Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.84070.80611.79670.91170.72991.13320.73620.560110.58741.1357
GMI 1.00471.02591.02391.05650.99740.96771.01060.95311.02440.9915
AQI 0.52841.07083.17970.83180.9731.10660.94571.73260.92471.0185
SGI 1.07121.11341.29711.5871.04411.12791.07191.38051.09811.117
DEPI 0.84031.149422.73670.04410.91081.00941.00480.93311.12560.8511
SGAI 1.36010.79941.13880.94351.0222.11380.42921.92940.3271.2317
LVGI 1.03341.13571.01270.75511.25960.91450.78861.21830.98790.9907
TATA -0.0334-0.03030.00830.0109-0.0101-0.0322-0.02-0.0114-0.0103-0.0098
M-score -3.00-2.651.92-2.04-2.85-2.53-2.60-2.576.50-2.35

HCP Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.5580.86251.104310.54811.24811.16211.67651.141611.401111.4403
GMI 0.96021.00061.02311.02361.0190.99930.98830.99140.99330.9964
AQI 1.9851.0411.04680.92470.98450.97620.92261.01850.99910.9705
SGI 1.44341.24071.16051.10211.05761.10231.12741.11131.08941.0731
DEPI 0.90570.94210.97261.12561.06681.01750.96650.85110.87790.9195
SGAI 1.89771.70081.81510.32580.34490.40640.51371.23861.26311.2014
LVGI 1.01250.96440.99490.98790.95821.01620.98570.99070.98750.9885
TATA -0.0057-0.0076-0.0109-0.0103-0.0105-0.0129-0.0129-0.0098-0.0096-0.0092
M-score -2.31-2.53-2.406.46-2.11-2.217.44-2.357.067.09
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