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

Warning Sign:

Beneish M-Score 0.20 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 0.20 signals that the company is a manipulator.

HZNP' s 10-Year Beneish M-Score Range
Min: -17.05   Max: 8.77
Current: 0.2

-17.05
8.77

During the past 6 years, the highest Beneish M-Score of Horizon Pharma Inc was 8.77. The lowest was -17.05. And the median was 0.20.


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 * 1.1229+0.528 * 0.5405+0.404 * 1.0843+0.892 * 4.6682+0.115 * 0.8286
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.3202+4.679 * -0.0966-0.327 * 1.4303
=0.20

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

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $40.10 Mil.
Revenue was 51.926 + 26.373 + 26.218 + 12.254 = $116.77 Mil.
Gross Profit was 44.307 + 24.825 + 20.905 + 8.737 = $98.77 Mil.
Total Current Assets was $162.75 Mil.
Total Assets was $299.13 Mil.
Property, Plant and Equipment(Net PPE) was $3.90 Mil.
Depreciation, Depletion and Amortization(DDA) was $12.79 Mil.
Selling, General & Admin. Expense(SGA) was $110.78 Mil.
Total Current Liabilities was $69.50 Mil.
Long-Term Debt was $112.77 Mil.
Net Income was -206.25 + -102.901 + -5.492 + -18.441 = $-333.08 Mil.
Non Operating Income was -204.735 + -68.761 + 1.118 + 0.454 = $-271.92 Mil.
Cash Flow from Operations was -0.757 + -11.178 + -9.441 + -10.899 = $-32.28 Mil.
Accounts Receivable was $7.65 Mil.
Revenue was 8.693 + 5.959 + 6.521 + 3.841 = $25.01 Mil.
Gross Profit was 4.924 + 2.816 + 2.711 + 0.986 = $11.44 Mil.
Total Current Assets was $96.81 Mil.
Total Assets was $169.86 Mil.
Property, Plant and Equipment(Net PPE) was $3.67 Mil.
Depreciation, Depletion and Amortization(DDA) was $6.38 Mil.
Selling, General & Admin. Expense(SGA) was $74.10 Mil.
Total Current Liabilities was $37.96 Mil.
Long-Term Debt was $34.40 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)
=(40.1 / 116.771) / (7.65 / 25.014)
=0.34340718 / 0.30582874
=1.1229

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)
=(24.825 / 25.014) / (44.307 / 116.771)
=0.45722395 / 0.84587783
=0.5405

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 - (162.749 + 3.897) / 299.134) / (1 - (96.811 + 3.668) / 169.86)
=0.44290519 / 0.40845991
=1.0843

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
=116.771 / 25.014
=4.6682

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))
=(6.384 / (6.384 + 3.668)) / (12.791 / (12.791 + 3.897))
=0.63509749 / 0.76647891
=0.8286

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)
=(110.778 / 116.771) / (74.1 / 25.014)
=0.94867733 / 2.96234109
=0.3202

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)
=((112.774 + 69.501) / 299.134) / ((34.403 + 37.961) / 169.86)
=0.6093423 / 0.42602143
=1.4303

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
=(-333.084 - -271.924 - -32.275) / 299.134
=-0.0966

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 0.20 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

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 0.165216.81754.80770.53672.97553.58780.86171.18081.1229
GMI -22.0398-3.0692-2.6925-0.13310.0460.32840.48520.45790.5405
AQI 0.48310.51420.43020.5250.89090.88441.27211.44551.0843
SGI 1.83672.64184.78322.72043.26683.28913.23713.90254.6682
DEPI 1.13121.21941.12470.94350.90510.78630.82820.84060.8286
SGAI 1.09011.0460.5660.71820.47970.42410.39490.34220.3202
LVGI 1.5261.67871.96130.96581.01720.96031.43331.60321.4303
TATA -0.4273-0.4734-0.3059-0.0597-0.0394-0.0579-0.0735-0.1054-0.0966
M-score -17.058.770.56-2.390.701.36-1.17-0.430.20
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