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Herbalife Ltd (NYSE:HLF)
Beneish M-Score
-3.02 (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 -3.02 suggests that the company is not a manipulator.

HLF' s 10-Year Beneish M-Score Range
Min: -3.44   Max: -2.1
Current: -3.02

-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 * 0.7566+0.528 * 0.9977+0.404 * 1.258+0.892 * 0.9672+0.115 * 0.9388
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.124+4.679 * -0.0659-0.327 * 1.1507
=-3.02

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

This Year (Mar15) TTM:Last Year (Mar14) TTM:
Accounts Receivable was $87 Mil.
Revenue was 1105.4 + 1133.587 + 1256.164 + 1306.2 = $4,801 Mil.
Gross Profit was 890 + 914.014 + 1001.223 + 1048.979 = $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 $1,920 Mil.
Total Current Liabilities was $1,169 Mil.
Long-Term Debt was $1,393 Mil.
Net Income was 78.2 + 103.292 + 11.248 + 119.532 = $312 Mil.
Non Operating Income was -2.3 + -0.008 + -9.831 + -0.006 = $-12 Mil.
Cash Flow from Operations was 161.1 + 61.903 + 101.914 + 156.983 = $482 Mil.
Accounts Receivable was $119 Mil.
Revenue was 1262.6 + 1268.871 + 1213.543 + 1219.239 = $4,964 Mil.
Gross Profit was 1011.4 + 1017.087 + 975.128 + 972.015 = $3,976 Mil.
Total Current Assets was $1,936 Mil.
Total Assets was $2,857 Mil.
Property, Plant and Equipment(Net PPE) was $346 Mil.
Depreciation, Depletion and Amortization(DDA) was $85 Mil.
Selling, General & Admin. Expense(SGA) was $1,766 Mil.
Total Current Liabilities was $902 Mil.
Long-Term Debt was $1,761 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)
=(86.8 / 4801.351) / (118.61 / 4964.253)
=0.01807825 / 0.02389282
=0.7566

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)
=(914.014 / 4964.253) / (890 / 4801.351)
=0.80085161 / 0.80273573
=0.9977

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 - (1428.2 + 356.7) / 2388.9) / (1 - (1936.104 + 346.363) / 2856.589)
=0.25283603 / 0.20098166
=1.258

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
=4801.351 / 4964.253
=0.9672

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))
=(85.036 / (85.036 + 346.363)) / (94.8 / (94.8 + 356.7))
=0.19711682 / 0.20996678
=0.9388

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)
=(1920.438 / 4801.351) / (1766.48 / 4964.253)
=0.39997867 / 0.35584004
=1.124

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)
=((1393.4 + 1168.9) / 2388.9) / ((1760.778 + 901.905) / 2856.589)
=1.07258571 / 0.93211974
=1.1507

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
=(312.272 - -12.145 - 481.9) / 2388.9
=-0.0659

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 -3.02 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 0.9971.08411.11570.94580.82891.09880.72890.8111
GMI 1.00320.98761.02260.99020.99061.00331.00010.9982
AQI 0.95950.95580.96460.93960.88710.87230.71731.2515
SGI 1.13811.09940.98531.17621.26341.17881.18491.0276
DEPI 0.99471.03480.8370.93111.03071.15411.11721.0356
SGAI 0.98151.02320.50070.97510.95820.99441.09151.1894
LVGI 1.39350.95480.8850.89941.01931.29591.03491.5201
TATA -0.0744-0.0462-0.0713-0.0729-0.0653-0.0602-0.0992-0.0799
M-score -2.85-2.54-2.62-2.71-2.75-2.64-3.16-3.10

Herbalife Ltd Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
DSRI 1.09880.89960.87140.81240.72890.90240.81950.82970.81110.7566
GMI 1.00331.00271.00361.00221.00011.00010.99650.99920.99820.9977
AQI 0.87230.74230.68880.69390.71730.85361.08041.13461.25151.258
SGI 1.17881.16781.17031.18431.18491.17311.1431.10361.02760.9672
DEPI 1.15411.10841.11941.14271.11721.20391.23391.16431.03560.9388
SGAI 0.99441.00951.04141.04931.09151.13391.1251.21931.18941.124
LVGI 1.29591.51421.02111.08031.03491.18831.47461.51021.52011.1507
TATA -0.1386-0.1163-0.1439-0.161-0.1593-0.1709-0.1257-0.1283-0.0799-0.0659
M-score -3.01-3.23-3.24-3.38-3.44-3.34-3.23-3.28-3.10-3.02
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