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Herbalife Ltd (NYSE:HLF)
Beneish M-Score
-2.84 (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 -2.84 suggests that the company is not a manipulator.

HLF' s Beneish M-Score Range Over the Past 10 Years
Min: -3.44   Max: -2.1
Current: -2.84

-3.44
-2.1

During the past 12 years, the highest Beneish M-Score of Herbalife Ltd was -2.10. The lowest was -3.44. 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 * 1.011+0.528 * 0.9927+0.404 * 1.0192+0.892 * 0.8842+0.115 * 0.9028
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.5022+4.679 * -0.0805-0.327 * 0.8931
=-2.84

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

This Year (Sep15) TTM:Last Year (Sep14) TTM:
Accounts Receivable was $90 Mil.
Revenue was 1102.9 + 1162.3 + 1105.4 + 1133.6 = $4,504 Mil.
Gross Profit was 896 + 933 + 890 + 914 = $3,633 Mil.
Total Current Assets was $1,492 Mil.
Total Assets was $2,422 Mil.
Property, Plant and Equipment(Net PPE) was $336 Mil.
Depreciation, Depletion and Amortization(DDA) was $97 Mil.
Selling, General & Admin. Expense(SGA) was $1,236 Mil.
Total Current Liabilities was $1,031 Mil.
Long-Term Debt was $1,399 Mil.
Net Income was 93.6 + 82.8 + 78.2 + 103.3 = $358 Mil.
Non Operating Income was 0 + 0 + -2.3 + 0 = $-2 Mil.
Cash Flow from Operations was 134.5 + 197.6 + 161.1 + 61.9 = $555 Mil.
Accounts Receivable was $101 Mil.
Revenue was 1256.2 + 1306.2 + 1262.6 + 1268.871 = $5,094 Mil.
Gross Profit was 1001.2 + 1049 + 1011.4 + 1017.087 = $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 $2,783 Mil.
Total Current Liabilities was $928 Mil.
Long-Term Debt was $1,728 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 / 4504.2) / (100.56 / 5093.871)
=0.01995915 / 0.01974137
=1.011

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)
=(933 / 5093.871) / (896 / 4504.2)
=0.80070481 / 0.80658052
=0.9927

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 - (1492.1 + 335.8) / 2421.5) / (1 - (1436.832 + 358.983) / 2364.498)
=0.24513731 / 0.24050898
=1.0192

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
=4504.2 / 5093.871
=0.8842

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))
=(90.693 / (90.693 + 358.983)) / (96.6 / (96.6 + 335.8))
=0.20168521 / 0.22340426
=0.9028

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)
=(1235.9 / 4504.2) / (2782.926 / 5093.871)
=0.27438835 / 0.54632832
=0.5022

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)
=((1398.7 + 1030.5) / 2421.5) / ((1727.919 + 928.034) / 2364.498)
=1.00317985 / 1.12326295
=0.8931

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
=(357.9 - -2.3 - 555.1) / 2421.5
=-0.0805

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 -2.84 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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.05431.15410.9971.08411.11570.94580.82891.09880.72890.8111
GMI 0.99431.00021.00320.98761.02260.99020.99061.00331.00010.9982
AQI 1.0240.79370.95950.95580.96460.93960.88710.87230.71731.2515
SGI 1.19631.20351.13811.09940.98531.17621.26341.17881.18491.0276
DEPI 1.32131.61770.99471.03480.8370.93111.03071.15411.11721.0356
SGAI 0.95741.00510.98151.02320.50070.97510.95820.99441.09151.1894
LVGI 0.82730.76971.39350.95480.8850.89941.01931.29591.03491.5201
TATA -0.0075-0.0017-0.0744-0.0462-0.0713-0.0729-0.0653-0.0602-0.0992-0.0799
M-score -2.18-2.10-2.85-2.54-2.62-2.71-2.75-2.64-3.16-3.10

Herbalife Ltd Quarterly Data

Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15
DSRI 0.87140.81240.72890.90240.81950.82970.81110.75661.00841.011
GMI 1.00361.00221.00011.00010.99650.99920.99820.99770.99960.9927
AQI 0.68880.69390.71730.85361.08041.13461.25151.2581.05981.0192
SGI 1.17031.18431.18491.17311.1431.10361.02760.96720.92210.8842
DEPI 1.11941.14271.11721.20391.23371.16421.03560.93880.89110.9028
SGAI 1.04141.04931.09151.13391.36541.6730.96130.90050.72090.5022
LVGI 1.02111.08031.03491.18831.47461.51021.52011.15070.93360.8931
TATA -0.1439-0.161-0.1593-0.1709-0.1257-0.1284-0.0799-0.066-0.0973-0.0805
M-score -3.24-3.38-3.44-3.34-3.27-3.35-3.06-2.98-2.92-2.84
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