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Herbalife Ltd (NYSE:HLF)
Beneish M-Score
-3.03 (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 -3.03 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: -3.03

-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 -2.75.


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 * 1.1092+0.528 * 0.9915+0.404 * 0.9507+0.892 * 0.9337+0.115 * 0.9281
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.668+4.679 * -0.1056-0.327 * 0.8598
=-3.03

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

This Year (Mar16) TTM:Last Year (Mar15) TTM:
Accounts Receivable was $90 Mil.
Revenue was 1119.6 + 1098.4 + 1102.9 + 1162.3 = $4,483 Mil.
Gross Profit was 906.5 + 894 + 896 + 933 = $3,630 Mil.
Total Current Assets was $1,474 Mil.
Total Assets was $2,386 Mil.
Property, Plant and Equipment(Net PPE) was $339 Mil.
Depreciation, Depletion and Amortization(DDA) was $99 Mil.
Selling, General & Admin. Expense(SGA) was $2,396 Mil.
Total Current Liabilities was $1,208 Mil.
Long-Term Debt was $993 Mil.
Net Income was 95.8 + 84.5 + 93.6 + 82.8 = $357 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 141.1 + 135.5 + 134.5 + 197.6 = $609 Mil.
Accounts Receivable was $87 Mil.
Revenue was 1105.4 + 1133.6 + 1256.2 + 1306.2 = $4,801 Mil.
Gross Profit was 890 + 914 + 1001.2 + 1049 = $3,854 Mil.
Total Current Assets was $1,428 Mil.
Total Assets was $2,389 Mil.
Property, Plant and Equipment(Net PPE) was $357 Mil.
Depreciation, Depletion and Amortization(DDA) was $95 Mil.
Selling, General & Admin. Expense(SGA) was $1,539 Mil.
Total Current Liabilities was $1,169 Mil.
Long-Term Debt was $1,393 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)
=(89.9 / 4483.2) / (86.8 / 4801.4)
=0.02005264 / 0.01807806
=1.1092

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)
=(894 / 4801.4) / (906.5 / 4483.2)
=0.80272421 / 0.80957798
=0.9915

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 - (1474.1 + 338.6) / 2386.3) / (1 - (1428.2 + 356.7) / 2388.9)
=0.24037212 / 0.25283603
=0.9507

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
=4483.2 / 4801.4
=0.9337

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))
=(94.8 / (94.8 + 356.7)) / (99 / (99 + 338.6))
=0.20996678 / 0.226234
=0.9281

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)
=(2396.3 / 4483.2) / (1538.6 / 4801.4)
=0.5345066 / 0.3204482
=1.668

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)
=((992.8 + 1207.9) / 2386.3) / ((1393.4 + 1168.9) / 2388.9)
=0.92222269 / 1.07258571
=0.8598

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
=(356.7 - 0 - 608.7) / 2386.3
=-0.1056

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 -3.03 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 1.00021.00320.98761.02260.99020.99061.00331.00020.99820.9917
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 1.61770.98751.04240.8370.93111.03071.15411.11681.03590.9041
SGAI 1.00510.98151.02320.99340.49150.95820.99441.09141.18940.9908
LVGI 0.76971.39350.95480.8850.89941.01931.29591.03491.52120.895
TATA -0.0406-0.0744-0.0462-0.0713-0.0729-0.0661-0.0525-0.0992-0.0806-0.1159
M-score -2.28-2.85-2.54-2.70-2.63-2.76-2.60-3.16-3.12-3.19

Herbalife Ltd Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
DSRI 0.72890.90240.81950.82970.81110.75661.00841.0110.92771.1092
GMI 1.00011.00010.99650.99920.99820.99770.99960.99270.99170.9915
AQI 0.71730.85361.08041.13461.22121.2581.05981.01920.91450.9507
SGI 1.18491.17311.14311.10361.02760.96720.92210.88420.90130.9337
DEPI 1.11741.20411.23391.16441.03560.93880.89110.90280.90410.9281
SGAI 1.09141.13391.36541.67290.96130.90050.72090.50221.65571.668
LVGI 1.03491.18831.47461.51021.52121.15070.93360.89310.8950.8598
TATA -0.0992-0.1188-0.1257-0.1284-0.0806-0.066-0.0973-0.0805-0.1159-0.1056
M-score -3.16-3.09-3.27-3.35-3.08-2.98-2.92-2.84-3.31-3.03
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