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Herbalife Ltd (NYSE:HLF)
Beneish M-Score
-3.25 (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 -3.25 suggests that the company is not a manipulator.

HLF' s Beneish M-Score Range Over the Past 10 Years
Min: -3.35   Max: -2.28
Current: -3.25

-3.35
-2.28

During the past 13 years, the highest Beneish M-Score of Herbalife Ltd was -2.28. The lowest was -3.35. And the median was -2.76.


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 * 1.0042+0.528 * 0.9913+0.404 * 0.8844+0.892 * 0.9711+0.115 * 1.0417
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1911+4.679 * -0.1481-0.327 * 0.9143
=-3.25

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

This Year (Jun16) TTM:Last Year (Jun15) TTM:
Accounts Receivable was $94 Mil.
Revenue was 1201.8 + 1119.6 + 1098.4 + 1102.9 = $4,523 Mil.
Gross Profit was 965.5 + 906.5 + 894 + 896 = $3,662 Mil.
Total Current Assets was $1,661 Mil.
Total Assets was $2,614 Mil.
Property, Plant and Equipment(Net PPE) was $372 Mil.
Depreciation, Depletion and Amortization(DDA) was $98 Mil.
Selling, General & Admin. Expense(SGA) was $1,338 Mil.
Total Current Liabilities was $1,458 Mil.
Long-Term Debt was $1,003 Mil.
Net Income was -22.9 + 95.8 + 84.5 + 93.6 = $251 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 226.9 + 141.1 + 135.5 + 134.5 = $638 Mil.
Accounts Receivable was $97 Mil.
Revenue was 1162.3 + 1105.4 + 1133.6 + 1256.2 = $4,658 Mil.
Gross Profit was 933 + 890 + 914 + 1001.2 = $3,738 Mil.
Total Current Assets was $1,461 Mil.
Total Assets was $2,415 Mil.
Property, Plant and Equipment(Net PPE) was $347 Mil.
Depreciation, Depletion and Amortization(DDA) was $96 Mil.
Selling, General & Admin. Expense(SGA) was $1,156 Mil.
Total Current Liabilities was $1,098 Mil.
Long-Term Debt was $1,390 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)
=(94.1 / 4522.7) / (96.5 / 4657.5)
=0.02080616 / 0.02071927
=1.0042

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)
=(3738.2 / 4657.5) / (3662 / 4522.7)
=0.80261943 / 0.80969332
=0.9913

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 - (1661.3 + 371.5) / 2613.9) / (1 - (1460.7 + 347.3) / 2415.1)
=0.22231149 / 0.25137675
=0.8844

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
=4522.7 / 4657.5
=0.9711

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))
=(96.4 / (96.4 + 347.3)) / (97.9 / (97.9 + 371.5))
=0.21726392 / 0.20856412
=1.0417

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)
=(1337.5 / 4522.7) / (1156.4 / 4657.5)
=0.29573043 / 0.24828771
=1.1911

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)
=((1003.3 + 1457.7) / 2613.9) / ((1389.5 + 1097.5) / 2415.1)
=0.94150503 / 1.02977102
=0.9143

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
=(251 - 0 - 638) / 2613.9
=-0.1481

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 -3.25 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

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 1.15410.9971.08411.11570.94580.82891.09880.72890.81110.9277
GMI 1.00021.00320.98761.02260.99020.99061.00331.00010.99820.9917
AQI 0.79370.95950.95580.96460.93960.88710.87230.71731.22120.9145
SGI 1.20351.13811.09940.98531.17621.26341.17881.18491.02760.9013
DEPI 1.61770.99471.03480.8370.93111.03071.15391.11741.03560.9041
SGAI 1.00510.98151.02320.50070.97510.95820.99441.09141.18940.9908
LVGI 0.76971.39350.95480.8850.89941.01931.29591.03491.52120.895
TATA -0.0406-0.0744-0.0462-0.0713-0.0771-0.0653-0.0602-0.0992-0.0806-0.1159
M-score -2.28-2.85-2.54-2.62-2.73-2.75-2.64-3.16-3.12-3.19

Herbalife Ltd Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
DSRI 0.90240.81950.82970.81110.75661.00841.0110.92771.10921.0042
GMI 1.00010.99650.99920.99820.99770.99960.99270.99170.99150.9913
AQI 0.85361.08041.13461.22121.2581.05981.01920.91450.95070.8844
SGI 1.17311.14311.10361.02760.96720.92210.88420.90130.93370.9711
DEPI 1.20411.23391.16441.03560.93880.89110.90280.90410.92811.0417
SGAI 1.13391.36541.67290.96130.90050.56520.37270.78340.78741.1911
LVGI 1.18831.47461.51021.52121.15070.93360.89310.8950.85980.9143
TATA -0.1188-0.1257-0.1284-0.0806-0.066-0.0973-0.0805-0.1159-0.1056-0.1481
M-score -3.09-3.27-3.35-3.08-2.98-2.89-2.81-3.16-2.88-3.25
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