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GuruFocus has detected 1 Warning Sign with Illumina Inc $ILMN.
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Illumina Inc (NAS:ILMN)
Beneish M-Score
-2.70 (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.

Illumina Inc has a M-score of -2.70 suggests that the company is not a manipulator.

ILMN' s Beneish M-Score Range Over the Past 10 Years
Min: -4.3   Max: 5.89
Current: -2.7

-4.3
5.89

During the past 13 years, the highest Beneish M-Score of Illumina Inc was 5.89. The lowest was -4.30. And the median was -2.54.


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 Illumina 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 * 0.916+0.528 * 1.0045+0.404 * 0.8622+0.892 * 1.0805+0.115 * 1.6337
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0285+4.679 * -0.0539-0.327 * 0.9284
=-2.70

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

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $381 Mil.
Revenue was 619.347 + 607.139 + 600.124 + 571.763 = $2,398 Mil.
Gross Profit was 419.439 + 426.15 + 423.805 + 397.054 = $1,666 Mil.
Total Current Assets was $2,318 Mil.
Total Assets was $4,281 Mil.
Property, Plant and Equipment(Net PPE) was $713 Mil.
Depreciation, Depletion and Amortization(DDA) was $141 Mil.
Selling, General & Admin. Expense(SGA) was $583 Mil.
Total Current Liabilities was $705 Mil.
Long-Term Debt was $1,048 Mil.
Net Income was 115.219 + 128.888 + 120.412 + 89.587 = $454 Mil.
Non Operating Income was -3.588 + -0.186 + -0.15 + 1.452 = $-2 Mil.
Cash Flow from Operations was 280.153 + 150.3 + 217.047 + 39.738 = $687 Mil.
Accounts Receivable was $385 Mil.
Revenue was 591.548 + 550.271 + 539.378 + 538.565 = $2,220 Mil.
Gross Profit was 410.359 + 387.539 + 376.365 + 375.027 = $1,549 Mil.
Total Current Assets was $2,097 Mil.
Total Assets was $3,688 Mil.
Property, Plant and Equipment(Net PPE) was $343 Mil.
Depreciation, Depletion and Amortization(DDA) was $126 Mil.
Selling, General & Admin. Expense(SGA) was $525 Mil.
Total Current Liabilities was $610 Mil.
Long-Term Debt was $1,016 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)
=(380.93 / 2398.373) / (384.893 / 2219.762)
=0.15882851 / 0.17339381
=0.916

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)
=(1549.29 / 2219.762) / (1666.448 / 2398.373)
=0.6979532 / 0.69482437
=1.0045

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 - (2318.091 + 713.334) / 4280.6) / (1 - (2096.823 + 342.694) / 3687.747)
=0.29182241 / 0.33848038
=0.8622

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
=2398.373 / 2219.762
=1.0805

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))
=(126.419 / (126.419 + 342.694)) / (140.915 / (140.915 + 713.334))
=0.26948518 / 0.16495776
=1.6337

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)
=(583.005 / 2398.373) / (524.657 / 2219.762)
=0.24308354 / 0.23635732
=1.0285

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)
=((1047.805 + 704.665) / 4280.6) / ((1015.649 + 610.494) / 3687.747)
=0.40939822 / 0.4409584
=0.9284

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
=(454.106 - -2.472 - 687.238) / 4280.6
=-0.0539

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.

Illumina Inc has a M-score of -2.70 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.

Illumina Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.04611.02591.01830.77480.8981.13620.89830.92491.1150.916
GMI 1.06190.99630.92781.03730.99190.99751.04970.92030.99891.0045
AQI 1.41890.72350.83481.05850.94321.03291.66260.89340.95410.8622
SGI 1.98711.56281.16241.35481.16931.08811.23741.30971.19251.0805
DEPI 0.71471.07691.12590.85990.75811.14250.86621.09341.10561.6337
SGAI 0.94260.93541.02490.92281.17811.01520.95080.90210.94351.0285
LVGI 5.0970.50841.05970.94191.62060.91830.88931.33020.86170.9284
TATA -0.3388-0.038-0.0707-0.0748-0.106-0.0717-0.1064-0.0359-0.0557-0.0539
M-score -4.30-2.06-2.76-2.66-3.21-2.56-2.54-2.61-2.42-2.70

Illumina Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.9090.92490.9121.10941.21221.1151.01010.90450.83340.916
GMI 0.94450.92030.9120.91550.94820.99891.01021.01471.01821.0045
AQI 0.8890.89340.83440.80460.9490.95411.06291.06360.95710.8622
SGI 1.29271.30971.30981.28431.23281.19251.13841.11721.10741.0805
DEPI 1.02811.09341.15641.15721.07431.10561.151.35231.61611.6337
SGAI 0.54870.90881.18871.16861.17760.93651.02921.07831.05591.0285
LVGI 1.2631.33021.29330.8720.76120.86170.8140.86840.92630.9284
TATA -0.0717-0.0359-0.0239-0.014-0.0154-0.0557-0.0568-0.0612-0.0482-0.0539
M-score -2.72-2.61-2.62-2.28-2.14-2.41-2.51-2.65-2.69-2.70
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