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Horizon Pharma PLC (NAS:HZNP)
Beneish M-Score
-0.75 (As of Today)

Warning Sign:

Beneish M-Score -0.75 higher than -2.22, which implies that it might have manipulated its financial results.

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.

Horizon Pharma PLC has a M-score of -0.75 signals that the company is a manipulator.

HZNP' s Beneish M-Score Range Over the Past 10 Years
Min: -17.05   Max: 8.77
Current: -0.75

-17.05
8.77

During the past 7 years, the highest Beneish M-Score of Horizon Pharma PLC was 8.77. The lowest was -17.05. And the median was 0.50.


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 Horizon Pharma PLC 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 * 1.0005+0.528 * 1.0993+0.404 * 1.005+0.892 * 2.7615+0.115 * 0.8965
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7386+4.679 * 0.0122-0.327 * 0.9545
=-0.75

* 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 $221.1 Mil.
Revenue was 226.544 + 172.821 + 113.141 + 103.841 = $616.3 Mil.
Gross Profit was 165.294 + 110.995 + 84.288 + 71.161 = $431.7 Mil.
Total Current Assets was $953.6 Mil.
Total Assets was $2,998.9 Mil.
Property, Plant and Equipment(Net PPE) was $10.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $110.4 Mil.
Selling, General & Admin. Expense(SGA) was $370.4 Mil.
Total Current Liabilities was $321.6 Mil.
Long-Term Debt was $1,137.0 Mil.
Net Income was 3.277 + 31.814 + -19.553 + -31.647 = $-16.1 Mil.
Non Operating Income was -0.176 + -76.245 + -12.372 + -33.229 = $-122.0 Mil.
Cash Flow from Operations was 88.383 + 41.584 + -70.739 + 10.079 = $69.3 Mil.
Accounts Receivable was $80.0 Mil.
Revenue was 75.126 + 66.062 + 51.926 + 30.08 = $223.2 Mil.
Gross Profit was 61.482 + 41.252 + 44.307 + 24.825 = $171.9 Mil.
Total Current Assets was $360.8 Mil.
Total Assets was $1,124.9 Mil.
Property, Plant and Equipment(Net PPE) was $4.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $21.1 Mil.
Selling, General & Admin. Expense(SGA) was $181.6 Mil.
Total Current Liabilities was $276.2 Mil.
Long-Term Debt was $297.0 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)
=(221.091 / 616.347) / (80.022 / 223.194)
=0.35871189 / 0.35853114
=1.0005

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)
=(110.995 / 223.194) / (165.294 / 616.347)
=0.77002966 / 0.70047879
=1.0993

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 - (953.628 + 10.38) / 2998.918) / (1 - (360.767 + 4.656) / 1124.895)
=0.67854806 / 0.67514924
=1.005

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
=616.347 / 223.194
=2.7615

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))
=(21.134 / (21.134 + 4.656)) / (110.372 / (110.372 + 10.38))
=0.81946491 / 0.91403869
=0.8965

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)
=(370.397 / 616.347) / (181.602 / 223.194)
=0.60095531 / 0.8136509
=0.7386

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)
=((1137.011 + 321.589) / 2998.918) / ((297.022 + 276.154) / 1124.895)
=0.48637542 / 0.50953733
=0.9545

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
=(-16.109 - -122.022 - 69.307) / 2998.918
=0.0122

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.

Horizon Pharma PLC has a M-score of -0.75 signals that the company is likely to 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.

Horizon Pharma PLC Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.4150.53671.17321.1545
GMI 16.1805-0.13270.46091.092
AQI 0.76490.5251.44551.292
SGI 2.91542.72043.92784.012
DEPI 1.03750.94350.84060.8627
SGAI 0.50130.71810.340.5659
LVGI 1.78360.96581.60320.7464
TATA -0.6995-0.0597-0.0009-0.0474
M-score 4.09-2.390.080.44

Horizon Pharma PLC Quarterly Data

Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15
DSRI 3.71250.91741.17321.11831.32391.07271.15451.03891.30761.0005
GMI 0.31740.45570.46090.54270.7790.9731.0921.16871.08111.0993
AQI 0.88441.27211.44551.08430.89411.5521.2921.15681.79261.005
SGI 3.17863.04033.92784.68735.334.47334.0123.05482.70022.7615
DEPI 0.78630.82820.84060.82860.84140.83810.86270.91140.90760.8965
SGAI 0.43880.42050.340.31890.31120.480.56590.71720.92150.7386
LVGI 0.96031.43331.60321.43031.30691.07260.74640.82020.77740.9545
TATA -0.0579-0.0735-0.0009-0.0083-0.0714-0.0372-0.04740.00690.0360.0122
M-score 1.37-1.320.080.631.190.770.44-0.33-0.07-0.75
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