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

Warning Sign:

Beneish M-Score 0.60 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 0.60 signals that the company is a manipulator.

HZNP' s 10-Year Beneish M-Score Range
Min: -17.06   Max: 8.77
Current: 0.6

-17.06
8.77

During the past 6 years, the highest Beneish M-Score of Horizon Pharma PLC was 8.77. The lowest was -17.06. And the median was 0.56.


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 * 1.0896+0.528 * 0.9578+0.404 * 1.552+0.892 * 4.4037+0.115 * 0.8381
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.4876+4.679 * -0.0607-0.327 * 1.0726
=0.60

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $80.02 Mil.
Revenue was 75.126 + 66.062 + 51.926 + 30.08 = $223.19 Mil.
Gross Profit was 61.482 + 41.252 + 44.307 + 24.825 = $171.87 Mil.
Total Current Assets was $360.77 Mil.
Total Assets was $1,124.90 Mil.
Property, Plant and Equipment(Net PPE) was $4.66 Mil.
Depreciation, Depletion and Amortization(DDA) was $21.13 Mil.
Selling, General & Admin. Expense(SGA) was $181.60 Mil.
Total Current Liabilities was $276.15 Mil.
Long-Term Debt was $297.02 Mil.
Net Income was 2.063 + -27.769 + -206.25 + -102.901 = $-334.86 Mil.
Non Operating Income was 16.176 + -15.582 + -204.735 + -68.761 = $-272.90 Mil.
Cash Flow from Operations was 1.466 + 16.761 + -0.757 + -11.178 = $6.29 Mil.
Accounts Receivable was $16.68 Mil.
Revenue was 24.112 + 11.131 + 8.693 + 6.747 = $50.68 Mil.
Gross Profit was 20.905 + 8.737 + 4.924 + 2.816 = $37.38 Mil.
Total Current Assets was $85.86 Mil.
Total Assets was $158.22 Mil.
Property, Plant and Equipment(Net PPE) was $3.52 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.73 Mil.
Selling, General & Admin. Expense(SGA) was $84.58 Mil.
Total Current Liabilities was $45.49 Mil.
Long-Term Debt was $29.67 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)
=(80.022 / 223.194) / (16.677 / 50.683)
=0.35853114 / 0.32904524
=1.0896

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)
=(41.252 / 50.683) / (61.482 / 223.194)
=0.73756486 / 0.77002966
=0.9578

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 - (360.767 + 4.656) / 1124.895) / (1 - (85.864 + 3.524) / 158.215)
=0.67514924 / 0.43502196
=1.552

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
=223.194 / 50.683
=4.4037

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))
=(7.728 / (7.728 + 3.524)) / (21.134 / (21.134 + 4.656))
=0.68681123 / 0.81946491
=0.8381

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)
=(181.602 / 223.194) / (84.576 / 50.683)
=0.8136509 / 1.66872521
=0.4876

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)
=((297.022 + 276.154) / 1124.895) / ((29.672 + 45.485) / 158.215)
=0.50953733 / 0.47503081
=1.0726

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
=(-334.857 - -272.902 - 6.292) / 1124.895
=-0.0607

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 0.60 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

Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.5161.2223
GMI -0.1380.4424
AQI 0.5251.4455
SGI 2.82923.7702
DEPI 0.94350.8406
SGAI 0.69050.3542
LVGI 0.96581.6032
TATA -0.0597-0.1054
M-score -2.31-0.52

Horizon Pharma PLC Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 16.79774.80420.5162.88923.62840.90381.22231.15351.35611.0896
GMI -3.0729-2.6945-0.13840.04740.32480.46260.44240.52620.76040.9578
AQI 0.51420.43020.5250.89090.88441.27211.44551.08430.89411.552
SGI 2.64494.78672.82923.36453.25233.08613.77024.54425.20314.4037
DEPI 1.3161.12470.94350.88360.75280.82820.84060.82860.84140.8381
SGAI 1.04470.56560.69050.46580.42890.41420.35420.3290.31880.4876
LVGI 1.67871.96130.96581.01720.96031.43331.60321.43031.30691.0726
TATA -0.4734-0.3059-0.0597-0.0394-0.0579-0.0735-0.1054-0.0966-0.1518-0.0607
M-score 8.770.56-2.310.711.36-1.29-0.520.110.720.60
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