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Health Net Inc (NYSE:HNT)
Beneish M-Score
-2.35 (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.

Health Net Inc has a M-score of -2.35 suggests that the company is not a manipulator.

HNT' s Beneish M-Score Range Over the Past 10 Years
Min: -6.02   Max: -0.17
Current: -2.35

-6.02
-0.17

During the past 13 years, the highest Beneish M-Score of Health Net Inc was -0.17. The lowest was -6.02. And the median was -2.52.


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 Health Net Inc 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 * 1.123+0.528 * 0.9666+0.404 * 0.9219+0.892 * 1.2287+0.115 * 2.2987
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0522+4.679 * -0.0515-0.327 * 1.1009
=-2.35

* 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 $998 Mil.
Revenue was 4153.667 + 4163.623 + 3889.896 + 3758.389 = $15,966 Mil.
Gross Profit was 677.128 + 662.619 + 604.493 + 573.111 = $2,517 Mil.
Total Current Assets was $5,009 Mil.
Total Assets was $6,023 Mil.
Property, Plant and Equipment(Net PPE) was $139 Mil.
Depreciation, Depletion and Amortization(DDA) was $19 Mil.
Selling, General & Admin. Expense(SGA) was $2,090 Mil.
Total Current Liabilities was $3,348 Mil.
Long-Term Debt was $610 Mil.
Net Income was 60.253 + 58.368 + 29.988 + 4.914 = $154 Mil.
Non Operating Income was -13.915 + -16.424 + 0 + 34.109 = $4 Mil.
Cash Flow from Operations was -30.681 + -260.275 + 860.618 + -109.662 = $460 Mil.
Accounts Receivable was $723 Mil.
Revenue was 3789.87 + 3421.392 + 3038.935 + 2743.244 = $12,993 Mil.
Gross Profit was 561.457 + 525.005 + 504.619 + 389.203 = $1,980 Mil.
Total Current Assets was $4,088 Mil.
Total Assets was $4,963 Mil.
Property, Plant and Equipment(Net PPE) was $92 Mil.
Depreciation, Depletion and Amortization(DDA) was $36 Mil.
Selling, General & Admin. Expense(SGA) was $1,617 Mil.
Total Current Liabilities was $2,462 Mil.
Long-Term Debt was $499 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)
=(997.858 / 15965.575) / (723.177 / 12993.441)
=0.0625006 / 0.05565708
=1.123

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)
=(662.619 / 12993.441) / (677.128 / 15965.575)
=0.15240643 / 0.15767368
=0.9666

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 - (5009.069 + 139.083) / 6023.431) / (1 - (4088.434 + 92.193) / 4962.904)
=0.14531236 / 0.15762485
=0.9219

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
=15965.575 / 12993.441
=1.2287

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))
=(36.038 / (36.038 + 92.193)) / (19.373 / (19.373 + 139.083))
=0.28103969 / 0.12226107
=2.2987

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)
=(2089.985 / 15965.575) / (1616.584 / 12993.441)
=0.13090571 / 0.12441539
=1.0522

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)
=((609.658 + 3348.034) / 6023.431) / ((499.453 + 2462.434) / 4962.904)
=0.65704945 / 0.59680522
=1.1009

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
=(153.523 - 3.77 - 460) / 6023.431
=-0.0515

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.

Health Net Inc has a M-score of -2.35 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.

Health Net Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.00223.19830.19731.1661.09772.40851.0270.47440.8680.6122
GMI 0.77970.91120.51222.48920.95230.96040.94291.18420.80470.9746
AQI 0.85780.94210.98861.03950.95350.89351.16970.80511.15460.7175
SGI 1.02531.08111.0931.08921.02260.86680.83810.98890.97921.2673
DEPI 0.91561.45950.74680.84890.79441.30451.24811.21830.90120.616
SGAI 1.01841.10732.53670.38771.0021.00531.04390.99681.06261.0822
LVGI 0.9140.86871.16551.03970.95310.98160.96081.01590.97291.2077
TATA 0.00970.0239-0.08350.0527-0.0692-0.00790.01190.04370.0189-0.1168
M-score -2.57-0.27-4.14-1.12-2.75-1.36-2.47-2.73-2.59-3.40

Health Net Inc Quarterly Data

Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15
DSRI 1.63931.10630.8680.6171.36491.80630.61220.89230.59431.123
GMI 0.95140.84060.79330.81080.88110.96670.97461.02621.01520.9666
AQI 1.09891.06731.15460.95430.79680.80720.71750.87821.02950.9219
SGI 1.00730.9990.97921.00351.0741.16551.26731.31551.30251.2287
DEPI 0.94480.92130.90120.9470.9970.56230.6160.70310.82412.2987
SGAI 1.11721.12271.09921.16621.08021.04881.08221.00621.03181.0522
LVGI 0.98271.02360.97291.04521.03331.08711.20771.17121.14371.1009
TATA 0.1071-0.00170.0189-0.0647-0.0586-0.127-0.1189-0.2023-0.1708-0.0515
M-score -1.39-2.49-2.60-3.30-2.52-2.37-3.41-3.37-3.44-2.35
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