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Horizon Pharma PLC (NAS:HZNP)
Beneish M-Score
-1.07 (As of Today)

Warning Sign:

Beneish M-Score -1.07 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 -1.07 signals that the company is a manipulator.

HZNP' s Beneish M-Score Range Over the Past 10 Years
Min: -2.32   Max: 4.06
Current: -1.07

-2.32
4.06

During the past 8 years, the highest Beneish M-Score of Horizon Pharma PLC was 4.06. The lowest was -2.32. 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 * 1.1168+0.528 * 1.0348+0.404 * 0.9041+0.892 * 2.5494+0.115 * 0.908
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8255+4.679 * -0.0119-0.327 * 1.0556
=-1.07

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

This Year (Dec15) TTM:Last Year (Dec14) TTM:
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 $3,066.9 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 $1,141.1 Mil.
Net Income was 23.994 + 3.277 + 31.814 + -19.553 = $39.5 Mil.
Non Operating Income was -29.391 + -0.176 + -76.245 + -12.372 = $-118.2 Mil.
Cash Flow from Operations was 134.938 + 88.383 + 41.584 + -70.739 = $194.2 Mil.
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 $324.7 Mil.
Total Assets was $1,114.3 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 $218.7 Mil.
Long-Term Debt was $297.2 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)
=(210.437 / 757.044) / (73.915 / 296.955)
=0.27797195 / 0.24890977
=1.1168

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)
=(165.294 / 296.955) / (176.965 / 757.044)
=0.7347982 / 0.71005384
=1.0348

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 - (1106.147 + 14.02) / 3066.947) / (1 - (324.695 + 7.241) / 1114.333)
=0.63476154 / 0.70212136
=0.9041

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
=757.044 / 296.955
=2.5494

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))
=(34.009 / (34.009 + 7.241)) / (138.343 / (138.343 + 14.02))
=0.82446061 / 0.90798291
=0.908

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)
=(440.305 / 757.044) / (209.233 / 296.955)
=0.58161084 / 0.70459497
=0.8255

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)
=((1141.115 + 357.552) / 3066.947) / ((297.169 + 218.671) / 1114.333)
=0.48865109 / 0.46291369
=1.0556

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
=(39.532 - -118.184 - 194.166) / 3066.947
=-0.0119

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 -1.07 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

Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 1.4150.53671.17321.15451.1168
GMI 16.1805-0.13270.46091.0921.0348
AQI 0.76490.5251.44551.28470.9041
SGI 2.91542.72043.92784.0122.5494
DEPI 1.03750.94350.84060.86270.908
SGAI 0.50130.71810.340.56590.8255
LVGI 1.78360.96581.60320.75891.0556
TATA -0.6995-0.0444-0.0009-0.0483-0.0119
M-score 4.09-2.320.080.42-1.07

Horizon Pharma PLC Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
DSRI 0.91741.17321.11831.32391.07271.15451.03891.30761.00051.1168
GMI 0.45570.46090.54270.7790.9731.0921.16871.08111.09931.0348
AQI 1.27211.44551.08430.89411.5521.28471.15681.79261.0050.9041
SGI 3.04033.92784.68735.334.47334.0123.05482.70022.76152.5494
DEPI 0.82820.84060.82860.84140.83810.86270.91140.90760.89650.908
SGAI 0.42050.340.31890.31120.480.56590.71720.92150.73860.8255
LVGI 1.43331.60321.43031.30691.07260.75890.82020.77740.95451.0556
TATA -0.0547-0.0009-0.0083-0.0714-0.0372-0.04830.00690.0360.0122-0.0119
M-score -1.230.080.631.190.770.42-0.33-0.07-0.75-1.07
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