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GuruFocus has detected 5 Warning Signs with Mead Johnson Nutrition Co $MJN.
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Mead Johnson Nutrition Co (NYSE:MJN)
Beneish M-Score
-2.56 (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.

Mead Johnson Nutrition Co has a M-score of -2.62 suggests that the company is not a manipulator.

MJN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.15   Max: -2.29
Current: -2.56

-3.15
-2.29

During the past 13 years, the highest Beneish M-Score of Mead Johnson Nutrition Co was -2.29. The lowest was -3.15. And the median was -2.62.


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 Mead Johnson Nutrition Co 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 * 1.0827+0.528 * 1.0054+0.404 * 0.9311+0.892 * 0.9302+0.115 * 1.03
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0008+4.679 * -0.0321-0.327 * 0.9563
=-2.62

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

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $381 Mil.
Revenue was 883.5 + 901.6 + 937.5 + 941.5 = $3,664 Mil.
Gross Profit was 553.3 + 575.1 + 603.8 + 608.3 = $2,341 Mil.
Total Current Assets was $2,817 Mil.
Total Assets was $4,227 Mil.
Property, Plant and Equipment(Net PPE) was $964 Mil.
Depreciation, Depletion and Amortization(DDA) was $101 Mil.
Selling, General & Admin. Expense(SGA) was $1,400 Mil.
Total Current Liabilities was $1,309 Mil.
Long-Term Debt was $2,973 Mil.
Net Income was 119.9 + 167.8 + 149.3 + 155.1 = $592 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 196.4 + 180.9 + 234.6 + 116 = $728 Mil.
Accounts Receivable was $378 Mil.
Revenue was 962.1 + 967 + 977.5 + 1032.4 = $3,939 Mil.
Gross Profit was 614.5 + 608.4 + 630.7 + 676 = $2,530 Mil.
Total Current Assets was $2,634 Mil.
Total Assets was $4,017 Mil.
Property, Plant and Equipment(Net PPE) was $927 Mil.
Depreciation, Depletion and Amortization(DDA) was $100 Mil.
Selling, General & Admin. Expense(SGA) was $1,504 Mil.
Total Current Liabilities was $1,242 Mil.
Long-Term Debt was $3,013 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)
=(381.1 / 3664.1) / (378.4 / 3939)
=0.10400917 / 0.09606499
=1.0827

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)
=(2529.6 / 3939) / (2340.5 / 3664.1)
=0.64219345 / 0.63876532
=1.0054

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 - (2817.3 + 963.6) / 4227.1) / (1 - (2634.4 + 927) / 4016.8)
=0.105557 / 0.11337383
=0.9311

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
=3664.1 / 3939
=0.9302

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))
=(99.9 / (99.9 + 927)) / (100.5 / (100.5 + 963.6))
=0.09728309 / 0.09444601
=1.03

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)
=(1399.9 / 3664.1) / (1503.8 / 3939)
=0.38205835 / 0.38177202
=1.0008

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)
=((2973.3 + 1308.8) / 4227.1) / ((3012.6 + 1242.3) / 4016.8)
=1.01301128 / 1.05927604
=0.9563

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
=(592.1 - 0 - 727.9) / 4227.1
=-0.0321

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.

Mead Johnson Nutrition Co has a M-score of -2.62 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.

Mead Johnson Nutrition Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.93030.83331.3480.93640.71520.98750.94830.9570.97171.1754
GMI 1.00891.01020.95461.03331.00731.02440.96611.03550.95611.0013
AQI 0.94671.04390.80281.13860.84971.5610.8280.98220.78180.9799
SGI 1.09861.11880.98061.11151.17041.0611.07671.04970.92330.9193
DEPI 1.03761.00880.98010.99960.90981.15271.14720.95850.97840.981
SGAI 1.02341.02121.06591.01281.01590.96151.00820.97131.03660.9808
LVGI 0.98231.10942.60410.87610.90260.89930.90460.89251.47740.9749
TATA -0.0353-0.0699-0.0695-0.0268-0.0378-0.0345-0.0353-0.0196-0.0641-0.0359
M-score -2.63-2.87-3.14-2.45-2.81-2.30-2.66-2.52-3.15-2.56

Mead Johnson Nutrition Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.9570.92120.86870.99050.97171.0641.0681.15761.17541.0827
GMI 1.03551.03621.01170.97190.95610.95830.97650.99511.00131.0054
AQI 0.98220.94570.990.87450.78180.98621.09391.00840.97990.9311
SGI 1.04971.02670.99530.95950.92330.89720.89250.9070.91930.9302
DEPI 0.95850.94090.92110.95450.97840.97010.98570.97040.9811.03
SGAI 0.96680.95930.98010.98881.02821.04631.01691.00340.98871.0007
LVGI 0.89250.88620.87561.08411.47741.51741.50231.26490.97490.9563
TATA -0.0196-0.0375-0.058-0.0407-0.0641-0.0689-0.0542-0.0731-0.0359-0.0321
M-score -2.52-2.67-2.84-2.81-3.15-3.04-2.91-2.85-2.56-2.62
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