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

Warning Sign:

Beneish M-Score 0.44 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 0.44 signals that the company is a manipulator.

HZNP' s 10-Year Beneish M-Score Range
Min: -2.39   Max: 0.44
Current: 0.44

-2.39
0.44

During the past 7 years, the highest Beneish M-Score of Horizon Pharma PLC was 0.44. The lowest was -2.39. And the median was 0.08.


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 * 1.1545+0.528 * 1.092+0.404 * 1.292+0.892 * 4.012+0.115 * 0.8627
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.5659+4.679 * -0.0474-0.327 * 0.7464
=0.44

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $73.9 Mil.
Revenue was 103.841 + 75.126 + 66.062 + 51.926 = $297.0 Mil.
Gross Profit was 71.161 + 61.482 + 41.252 + 44.307 = $218.2 Mil.
Total Current Assets was $326.2 Mil.
Total Assets was $1,134.6 Mil.
Property, Plant and Equipment(Net PPE) was $7.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $34.0 Mil.
Selling, General & Admin. Expense(SGA) was $209.2 Mil.
Total Current Liabilities was $219.4 Mil.
Long-Term Debt was $297.2 Mil.
Net Income was -31.647 + 2.063 + -27.769 + -206.25 = $-263.6 Mil.
Non Operating Income was -33.229 + 16.176 + -15.582 + -204.735 = $-237.4 Mil.
Cash Flow from Operations was 10.079 + 1.466 + 16.761 + -0.757 = $27.5 Mil.
Accounts Receivable was $16.0 Mil.
Revenue was 30.08 + 24.112 + 11.131 + 8.693 = $74.0 Mil.
Gross Profit was 24.825 + 20.905 + 8.737 + 4.924 = $59.4 Mil.
Total Current Assets was $110.8 Mil.
Total Assets was $252.6 Mil.
Property, Plant and Equipment(Net PPE) was $3.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $9.3 Mil.
Selling, General & Admin. Expense(SGA) was $92.2 Mil.
Total Current Liabilities was $43.3 Mil.
Long-Term Debt was $110.8 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)
=(73.915 / 296.955) / (15.958 / 74.016)
=0.24890977 / 0.21560203
=1.1545

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)
=(61.482 / 74.016) / (71.161 / 296.955)
=0.80240759 / 0.7347982
=1.092

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 - (326.225 + 7.241) / 1134.624) / (1 - (110.765 + 3.78) / 252.596)
=0.70609999 / 0.54652884
=1.292

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
=296.955 / 74.016
=4.012

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))
=(9.31 / (9.31 + 3.78)) / (34.009 / (34.009 + 7.241))
=0.71122995 / 0.82446061
=0.8627

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)
=(209.233 / 296.955) / (92.161 / 74.016)
=0.70459497 / 1.2451497
=0.5659

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)
=((297.169 + 219.392) / 1134.624) / ((110.762 + 43.31) / 252.596)
=0.45527064 / 0.60995424
=0.7464

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
=(-263.603 - -237.37 - 27.549) / 1134.624
=-0.0474

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 0.44 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 0.53671.17321.1545
GMI -0.13270.46091.092
AQI 0.5251.44551.292
SGI 2.72043.92784.012
DEPI 0.94350.84060.8627
SGAI 0.71810.340.5659
LVGI 0.96581.60320.7464
TATA -0.0597-0.0009-0.0474
M-score -2.390.080.44

Horizon Pharma PLC Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 4.80770.53672.97553.71250.91741.17321.11831.32391.07271.1545
GMI -2.6925-0.13310.0460.31740.45570.46090.54270.7790.9731.092
AQI 0.43020.5250.89090.88441.27211.44551.08430.89411.5521.292
SGI 4.78322.72043.26683.17863.04033.92784.68735.334.47334.012
DEPI 1.12470.94350.90510.78630.82820.84060.82860.84140.83810.8627
SGAI 0.5660.71820.47970.43880.42050.340.31890.31120.480.5659
LVGI 1.96130.96581.01720.96031.43331.60321.43031.30691.07260.7464
TATA -0.3059-0.0597-0.0394-0.0579-0.0735-0.0009-0.0083-0.0714-0.0372-0.0474
M-score 0.56-2.390.701.37-1.320.080.631.190.770.44
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