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Herbalife Ltd (NYSE:HLF)
Beneish M-Score
-3.28 (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.

Herbalife Ltd has a M-score of -3.28 suggests that the company is not a manipulator.

HLF' s 10-Year Beneish M-Score Range
Min: -3.44   Max: -2.1
Current: -3.28

-3.44
-2.1

During the past 11 years, the highest Beneish M-Score of Herbalife Ltd was -2.10. The lowest was -3.44. And the median was -2.73.


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 Herbalife Ltd 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 * 0.8297+0.528 * 0.9992+0.404 * 1.1346+0.892 * 1.1036+0.115 * 1.1639
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2192+4.679 * -0.1283-0.327 * 1.5102
=-3.28

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $101 Mil.
Revenue was 1256.164 + 1306.2 + 1262.649 + 1268.879 = $5,094 Mil.
Gross Profit was 1001.223 + 1048.979 + 1011.484 + 1017.072 = $4,079 Mil.
Total Current Assets was $1,437 Mil.
Total Assets was $2,364 Mil.
Property, Plant and Equipment(Net PPE) was $359 Mil.
Depreciation, Depletion and Amortization(DDA) was $91 Mil.
Selling, General & Admin. Expense(SGA) was $2,028 Mil.
Total Current Liabilities was $928 Mil.
Long-Term Debt was $1,728 Mil.
Net Income was 11.248 + 119.532 + 74.628 + 123.54 = $329 Mil.
Non Operating Income was -9.831 + -0.006 + -3.161 + 0 = $-13 Mil.
Cash Flow from Operations was 101.914 + 156.934 + 190.649 + 195.891 = $645 Mil.
Accounts Receivable was $110 Mil.
Revenue was 1213.543 + 1219.239 + 1123.647 + 1059.32 = $4,616 Mil.
Gross Profit was 975.128 + 972.015 + 897.67 + 848.215 = $3,693 Mil.
Total Current Assets was $1,579 Mil.
Total Assets was $2,343 Mil.
Property, Plant and Equipment(Net PPE) was $268 Mil.
Depreciation, Depletion and Amortization(DDA) was $82 Mil.
Selling, General & Admin. Expense(SGA) was $1,507 Mil.
Total Current Liabilities was $868 Mil.
Long-Term Debt was $875 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)
=(100.56 / 5093.892) / (109.83 / 4615.749)
=0.01974129 / 0.02379462
=0.8297

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)
=(1048.979 / 4615.749) / (1001.223 / 5093.892)
=0.8000929 / 0.80071545
=0.9992

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 - (1436.832 + 358.983) / 2364.498) / (1 - (1578.833 + 267.85) / 2343.447)
=0.24050898 / 0.21198004
=1.1346

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
=5093.892 / 4615.749
=1.1036

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))
=(82.189 / (82.189 + 267.85)) / (90.723 / (90.723 + 358.983))
=0.23479955 / 0.20173847
=1.1639

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)
=(2028.179 / 5093.892) / (1507.338 / 4615.749)
=0.39815901 / 0.32656412
=1.2192

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)
=((1727.919 + 928.034) / 2364.498) / ((875.018 + 867.963) / 2343.447)
=1.12326295 / 0.74376805
=1.5102

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
=(328.948 - -12.998 - 645.388) / 2364.498
=-0.1283

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.

Herbalife Ltd has a M-score of -3.28 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 own currency.

Herbalife Ltd Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.9971.08411.11570.94580.82891.09880.729
GMI 1.00320.98761.02260.99020.99061.00331.0002
AQI 0.95950.95580.96460.93960.88710.87230.7173
SGI 1.13811.09940.98531.17621.26341.17881.1849
DEPI 0.99471.03480.8370.93111.03071.15411.1167
SGAI 0.98151.02320.50070.97510.95820.99441.0914
LVGI 1.39350.95480.8850.89941.01931.29591.0348
TATA -0.0744-0.0462-0.0713-0.0729-0.0653-0.0602-0.0992
M-score -2.85-2.54-2.62-2.71-2.75-2.64-3.16

Herbalife Ltd Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.76560.86151.09880.89960.87140.81240.7290.90240.81950.8297
GMI 0.99890.99931.00331.00271.00361.00221.00021.00010.99650.9992
AQI 0.93890.89960.87230.74230.68880.69390.71730.85361.08041.1346
SGI 1.21741.17811.17881.16781.17031.18431.18491.17311.14311.1036
DEPI 1.03251.0461.15411.10841.11941.14271.11671.20371.23351.1639
SGAI 0.97741.00160.99441.00951.04141.04931.09141.13391.12491.2192
LVGI 1.46161.23971.29591.51421.02111.08031.03481.18831.47461.5102
TATA -0.1286-0.1189-0.1386-0.1163-0.1439-0.161-0.1593-0.1709-0.1257-0.1283
M-score -3.27-3.12-3.01-3.23-3.24-3.38-3.44-3.34-3.23-3.28
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