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GuruFocus has detected 5 Warning Signs with Horizon Pharma PLC $HZNP.
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Horizon Pharma PLC (NAS:HZNP)
Beneish M-Score
-2.58 (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.

Horizon Pharma PLC has a M-score of -2.58 suggests that the company is not a manipulator.

HZNP' s Beneish M-Score Range Over the Past 10 Years
Min: -2.58   Max: 4.06
Current: -2.58

-2.58
4.06

During the past 9 years, the highest Beneish M-Score of Horizon Pharma PLC was 4.06. The lowest was -2.58. 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 * 1.121+0.528 * 1.1851+0.404 * 1.1846+0.892 * 1.296+0.115 * 1.0041
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.066+4.679 * -0.1263-0.327 * 1.1503
=-2.58

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $305.7 Mil.
Revenue was 310.35 + 208.702 + 257.378 + 204.69 = $981.1 Mil.
Gross Profit was 160.598 + 123.541 + 176.252 + 127.457 = $587.8 Mil.
Total Current Assets was $1,046.3 Mil.
Total Assets was $4,292.1 Mil.
Property, Plant and Equipment(Net PPE) was $23.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $221.8 Mil.
Selling, General & Admin. Expense(SGA) was $608.3 Mil.
Total Current Liabilities was $605.9 Mil.
Long-Term Debt was $1,799.7 Mil.
Net Income was -130.542 + -5.87 + 14.984 + -45.406 = $-166.8 Mil.
Non Operating Income was -0.881 + 6.771 + -0.011 + -0.187 = $5.7 Mil.
Cash Flow from Operations was 139.185 + 128.787 + 47.303 + 54.181 = $369.5 Mil.
Accounts Receivable was $210.4 Mil.
Revenue was 244.538 + 226.544 + 172.821 + 113.141 = $757.0 Mil.
Gross Profit was 176.965 + 165.294 + 110.995 + 84.288 = $537.5 Mil.
Total Current Assets was $1,106.1 Mil.
Total Assets was $3,058.6 Mil.
Property, Plant and Equipment(Net PPE) was $14.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $138.3 Mil.
Selling, General & Admin. Expense(SGA) was $440.3 Mil.
Total Current Liabilities was $357.6 Mil.
Long-Term Debt was $1,132.8 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)
=(305.725 / 981.12) / (210.437 / 757.044)
=0.31160816 / 0.27797195
=1.121

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)
=(537.542 / 757.044) / (587.848 / 981.12)
=0.71005384 / 0.59916014
=1.1851

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 - (1046.282 + 23.484) / 4292.059) / (1 - (1106.147 + 14.02) / 3058.588)
=0.75075692 / 0.63376336
=1.1846

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
=981.12 / 757.044
=1.296

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))
=(138.343 / (138.343 + 14.02)) / (221.837 / (221.837 + 23.484))
=0.90798291 / 0.90427236
=1.0041

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)
=(608.308 / 981.12) / (440.305 / 757.044)
=0.62001386 / 0.58161084
=1.066

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)
=((1799.743 + 605.852) / 4292.059) / ((1132.756 + 357.552) / 3058.588)
=0.56047575 / 0.4872536
=1.1503

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
=(-166.834 - 5.692 - 369.456) / 4292.059
=-0.1263

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 -2.58 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 local exchange's currency.

Horizon Pharma PLC Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.4150.53671.17321.15451.11681.121
GMI 16.1805-0.13270.46091.0921.03481.1851
AQI 0.76490.5251.44551.28470.90261.1846
SGI 2.91542.72043.92784.0122.54941.296
DEPI 1.03750.94350.84060.86270.9081.0041
SGAI 0.50130.71810.340.56590.82551.066
LVGI 1.78360.96581.60320.75891.05261.1503
TATA -0.6995-0.0444-0.0009-0.0483-0.0119-0.1263
M-score 4.09-2.320.080.42-1.06-2.58

Horizon Pharma PLC Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.07271.15451.03891.30761.00051.11680.96270.82931.10531.121
GMI 0.9731.0921.16871.08111.09931.03481.05341.01891.06111.1851
AQI 1.5521.28471.15681.79261.0050.90261.40671.01610.9771.1846
SGI 4.47334.0123.05482.70022.76152.54942.36922.00711.48511.296
DEPI 0.83810.86270.91140.90760.89650.9080.93260.98530.96661.0041
SGAI 0.480.56590.71720.92150.73860.82550.88510.75860.96861.066
LVGI 1.07260.75890.82020.77740.95451.05260.98560.9981.04311.1503
TATA -0.0372-0.04830.00690.0360.0122-0.0119-0.0622-0.0924-0.1059-0.1263
M-score 0.770.42-0.33-0.07-0.75-1.06-1.37-2.11-2.44-2.58
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