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Beneish M-Score 10.65 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.
Isis Pharmaceuticals has a M-score of 10.65 signals that the company is a manipulator.
During the past 13 years, the highest Beneish M-Score of Isis Pharmaceuticals was 10.65. The lowest was -4.67. And the median was -2.41.
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 Isis Pharmaceuticals 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 * 15.4896||+||0.528 * 1||+||0.404 * 0.7911||+||0.892 * 1.3378||+||0.115 * 1.2449|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.964||+||4.679 * -0.0951||-||0.327 * 1.0204|
|This Year (Jun14) TTM:||Last Year (Jun13) TTM:|
|Accounts Receivable was $41.9 Mil.|
Revenue was 57.076 + 28.161 + 42.249 + 23.585 = $151.1 Mil.
Gross Profit was 57.076 + 28.161 + 42.249 + 23.585 = $151.1 Mil.
Total Current Assets was $705.8 Mil.
Total Assets was $817.8 Mil.
Property, Plant and Equipment(Net PPE) was $86.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $12.0 Mil.
Selling, General & Admin. Expense(SGA) was $16.9 Mil.
Total Current Liabilities was $100.8 Mil.
Long-Term Debt was $229.7 Mil.
Net Income was -12.081 + -31.28 + -24.276 + -24.57 = $-92.2 Mil.
Non Operating Income was -0.26 + 0.397 + 0.305 + 0.175 = $0.6 Mil.
Cash Flow from Operations was -34.015 + -32.328 + -14.492 + 65.821 = $-15.0 Mil.
|Accounts Receivable was $2.0 Mil.
Revenue was 38.092 + 43.36 + 19.873 + 11.601 = $112.9 Mil.
Gross Profit was 38.092 + 43.36 + 19.873 + 11.601 = $112.9 Mil.
Total Current Assets was $669.1 Mil.
Total Assets was $788.7 Mil.
Property, Plant and Equipment(Net PPE) was $88.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $15.8 Mil.
Selling, General & Admin. Expense(SGA) was $13.1 Mil.
Total Current Liabilities was $87.0 Mil.
Long-Term Debt was $225.4 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(41.941 / 151.071)||/||(2.024 / 112.926)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(28.161 / 112.926)||/||(57.076 / 151.071)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (705.797 + 86.321) / 817.777)||/||(1 - (669.061 + 88.312) / 788.651)|
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.
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))|
|=||(15.765 / (15.765 + 88.312))||/||(11.958 / (11.958 + 86.321))|
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)|
|=||(16.949 / 151.071)||/||(13.142 / 112.926)|
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)|
|=||((229.714 + 100.816) / 817.777)||/||((225.391 + 86.995) / 788.651)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(-92.207 - 0.617||-||-15.014)||/||817.777|
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.
Isis Pharmaceuticals has a M-score of 10.65 signals that the company is likely to be a manipulator.
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
Isis Pharmaceuticals Annual Data
Isis Pharmaceuticals Quarterly Data