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GuruFocus has detected 4 Warning Signs with Horizon Pharma PLC $HZNP.
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Horizon Pharma PLC (NAS:HZNP)
Beneish M-Score
-2.44 (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 -2.44 suggests that the company is not a manipulator.

HZNP' s Beneish M-Score Range Over the Past 10 Years
Min: -17.05   Max: 8.77
Current: -2.44

-17.05
8.77

During the past 8 years, the highest Beneish M-Score of Horizon Pharma PLC was 8.77. The lowest was -17.05. And the median was 0.01.


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 * 1.1053+0.528 * 1.0611+0.404 * 0.977+0.892 * 1.4851+0.115 * 0.9666
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9686+4.679 * -0.1059-0.327 * 1.0431
=-2.44

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

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $362.9 Mil.
Revenue was 208.702 + 257.378 + 204.69 + 244.538 = $915.3 Mil.
Gross Profit was 123.541 + 176.252 + 127.457 + 176.965 = $604.2 Mil.
Total Current Assets was $1,117.7 Mil.
Total Assets was $3,349.7 Mil.
Property, Plant and Equipment(Net PPE) was $11.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $198.8 Mil.
Selling, General & Admin. Expense(SGA) was $532.8 Mil.
Total Current Liabilities was $556.2 Mil.
Long-Term Debt was $1,143.2 Mil.
Net Income was -5.87 + 14.984 + -45.406 + 23.994 = $-12.3 Mil.
Non Operating Income was 6.771 + -0.011 + -0.187 + -29.391 = $-22.8 Mil.
Cash Flow from Operations was 128.787 + 47.303 + 54.181 + 134.938 = $365.2 Mil.
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.



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)
=(362.899 / 915.308) / (221.091 / 616.347)
=0.39647747 / 0.35871189
=1.1053

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)
=(431.738 / 616.347) / (604.215 / 915.308)
=0.70047879 / 0.66012206
=1.0611

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 - (1117.706 + 11.437) / 3349.671) / (1 - (953.628 + 10.38) / 2998.918)
=0.66290928 / 0.67854806
=0.977

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
=915.308 / 616.347
=1.4851

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))
=(110.372 / (110.372 + 10.38)) / (198.783 / (198.783 + 11.437))
=0.91403869 / 0.94559509
=0.9666

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)
=(532.79 / 915.308) / (370.397 / 616.347)
=0.58208822 / 0.60095531
=0.9686

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)
=((1143.224 + 556.231) / 3349.671) / ((1137.011 + 321.589) / 2998.918)
=0.50734983 / 0.48637542
=1.0431

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
=(-12.298 - -22.818 - 365.209) / 3349.671
=-0.1059

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 -2.44 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

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

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 1.32391.07271.15451.03891.30761.00051.11680.96270.82931.1053
GMI 0.7790.9731.0921.16871.08111.09931.03481.05341.01891.0611
AQI 0.89411.5521.28471.15681.79261.0050.90411.40671.01610.977
SGI 5.334.47334.0123.05482.70022.76152.54942.36922.00711.4851
DEPI 0.84140.83810.86270.91140.90760.89650.9080.93260.98530.9666
SGAI 0.31120.480.56590.71720.92150.73860.82550.88510.75860.9686
LVGI 1.30691.07260.75890.82020.77740.95451.05560.98560.9981.0431
TATA -0.0714-0.0372-0.04830.00690.0360.0122-0.0119-0.0622-0.0924-0.1059
M-score 1.190.770.42-0.33-0.07-0.75-1.07-1.37-2.11-2.44
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