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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 -3.44 suggests that the company is not a manipulator.
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.
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 * 0.729||+||0.528 * 1.0002||+||0.404 * 0.7173||+||0.892 * 1.1849||+||0.115 * 1.1167|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0914||+||4.679 * -0.1593||-||0.327 * 1.0348|
|This Year (Dec13) TTM:||Last Year (Dec12) TTM:|
|Accounts Receivable was $100 Mil.|
Revenue was 1268.879 + 1213.543 + 1219.239 + 1123.647 = $4,825 Mil.
Gross Profit was 1017.072 + 975.128 + 972.015 + 897.67 = $3,862 Mil.
Total Current Assets was $1,643 Mil.
Total Assets was $2,474 Mil.
Property, Plant and Equipment(Net PPE) was $319 Mil.
Depreciation, Depletion and Amortization(DDA) was $85 Mil.
Selling, General & Admin. Expense(SGA) was $1,629 Mil.
Total Current Liabilities was $922 Mil.
Long-Term Debt was $850 Mil.
Net Income was 123.54 + 141.95 + 143.162 + 118.873 = $528 Mil.
Non Operating Income was 0 + 0 + 148.721 + 0 = $149 Mil.
Cash Flow from Operations was 195.891 + 225.531 + 213.826 + 137.627 = $773 Mil.
|Accounts Receivable was $116 Mil.
Revenue was 1059.32 + 1016.887 + 1031.948 + 964.175 = $4,072 Mil.
Gross Profit was 848.215 + 815.29 + 828.211 + 768.031 = $3,260 Mil.
Total Current Assets was $984 Mil.
Total Assets was $1,724 Mil.
Property, Plant and Equipment(Net PPE) was $243 Mil.
Depreciation, Depletion and Amortization(DDA) was $74 Mil.
Selling, General & Admin. Expense(SGA) was $1,260 Mil.
Total Current Liabilities was $762 Mil.
Long-Term Debt was $431 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(100.326 / 4825.308)||/||(116.139 / 4072.33)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(975.128 / 4072.33)||/||(1017.072 / 4825.308)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (1643.12 + 318.86) / 2473.701)||/||(1 - (984.047 + 242.886) / 1724.143)|
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.
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))|
|=||(74.384 / (74.384 + 242.886))||/||(84.739 / (84.739 + 318.86))|
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)|
|=||(1629.052 / 4825.308)||/||(1259.667 / 4072.33)|
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)|
|=||((850.019 + 922.178) / 2473.701)||/||((431.305 + 762.362) / 1724.143)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(527.525 - 148.721||-||772.875)||/||2473.701|
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 -3.44 suggests that the company will not be a manipulator.
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
Herbalife, Ltd. Annual Data
Herbalife, Ltd. Quarterly Data