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Horizon Pharma Inc (NAS:HZNP)
Beneish M-Score
-0.41 (As of Today)

Warning Sign:

Beneish M-Score -0.41 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 Inc has a M-score of -0.41 signals that the company is a manipulator.

HZNP' s 10-Year Beneish M-Score Range
Min: -2.39   Max: -0.41
Current: -0.41

-2.39
-0.41

During the past 6 years, the highest Beneish M-Score of Horizon Pharma Inc was -0.41. The lowest was -2.39. And the median was -1.40.


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 Inc 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 * 1.1732+0.528 * 0.4609+0.404 * 1.4455+0.892 * 3.9278+0.115 * 0.8406
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.34+4.679 * -0.1054-0.327 * 1.6032
=-0.41

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $15.96 Mil.
Revenue was 26.373 + 26.218 + 12.254 + 9.171 = $74.02 Mil.
Gross Profit was 24.825 + 20.905 + 8.737 + 4.924 = $59.39 Mil.
Total Current Assets was $110.77 Mil.
Total Assets was $252.60 Mil.
Property, Plant and Equipment(Net PPE) was $3.78 Mil.
Depreciation, Depletion and Amortization(DDA) was $9.31 Mil.
Selling, General & Admin. Expense(SGA) was $92.16 Mil.
Total Current Liabilities was $43.31 Mil.
Long-Term Debt was $110.76 Mil.
Net Income was -102.901 + -5.492 + -18.441 + -22.171 = $-149.01 Mil.
Non Operating Income was -68.761 + 1.118 + 0.454 + -0.905 = $-68.09 Mil.
Cash Flow from Operations was -11.178 + -9.441 + -10.899 + -22.769 = $-54.29 Mil.
Accounts Receivable was $3.46 Mil.
Revenue was 5.959 + 6.521 + 3.841 + 2.523 = $18.84 Mil.
Gross Profit was 2.816 + 2.711 + 0.986 + 0.456 = $6.97 Mil.
Total Current Assets was $116.92 Mil.
Total Assets was $193.98 Mil.
Property, Plant and Equipment(Net PPE) was $3.73 Mil.
Depreciation, Depletion and Amortization(DDA) was $5.54 Mil.
Selling, General & Admin. Expense(SGA) was $69.01 Mil.
Total Current Liabilities was $36.94 Mil.
Long-Term Debt was $36.87 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)
=(15.958 / 74.016) / (3.463 / 18.844)
=0.21560203 / 0.18377202
=1.1732

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)
=(20.905 / 18.844) / (24.825 / 74.016)
=0.36982594 / 0.80240759
=0.4609

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 - (110.765 + 3.78) / 252.596) / (1 - (116.918 + 3.725) / 193.984)
=0.54652884 / 0.37807757
=1.4455

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
=74.016 / 18.844
=3.9278

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))
=(5.538 / (5.538 + 3.725)) / (9.31 / (9.31 + 3.78))
=0.59786246 / 0.71122995
=0.8406

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)
=(92.161 / 74.016) / (69.005 / 18.844)
=1.2451497 / 3.6619083
=0.34

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)
=((110.762 + 43.31) / 252.596) / ((36.866 + 36.935) / 193.984)
=0.60995424 / 0.3804489
=1.6032

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
=(-149.005 - -68.094 - -54.287) / 252.596
=-0.1054

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 Inc has a M-score of -0.41 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 Inc Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.53671.1732
GMI -0.13270.4609
AQI 0.5251.4455
SGI 2.72043.9278
DEPI 0.94350.8406
SGAI 0.71810.34
LVGI 0.96581.6032
TATA -0.0597-0.1054
M-score -2.39-0.41

Horizon Pharma Inc Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.165216.81754.80770.53672.91973.53720.8541.1732
GMI -22.0398-3.0692-2.6925-0.13310.04690.33310.48960.4609
AQI 0.48310.51420.43020.5250.89090.88441.27211.4455
SGI 1.83672.64184.78322.72043.32923.33613.26623.9278
DEPI 1.13121.21941.12470.94350.90510.78630.82820.8406
SGAI 1.09011.0460.5660.71820.47070.41810.39140.34
LVGI 1.5261.67871.96130.96581.01720.96031.43331.6032
TATA -0.4273-0.4734-0.3059-0.0597-0.0394-0.0579-0.0735-0.1054
M-score -17.058.770.56-2.390.711.36-1.15-0.41
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