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GuruFocus has detected 4 Warning Signs with Merus Labs International Inc $MSLI.
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Merus Labs International Inc (NAS:MSLI)
Beneish M-Score
-1.98 (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.

Merus Labs International Inc has a M-score of -1.99 signals that the company is a manipulator.

MSLI' s Beneish M-Score Range Over the Past 10 Years
Min: -4.16   Max: 19.16
Current: -1.98

-4.16
19.16

During the past 13 years, the highest Beneish M-Score of Merus Labs International Inc was 19.16. The lowest was -4.16. And the median was -1.98.


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 Merus Labs International 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 * 1.1471+0.528 * 1.2651+0.404 * 1.1523+0.892 * 1.7672+0.115 * 1.0043
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9739+4.679 * -0.0726-0.327 * 1.6124
=-1.99

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

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $20.85 Mil.
Revenue was 22.7265791883 + 19.8984023577 + 14.897928323 + 11.6137971268 = $69.14 Mil.
Gross Profit was 14.4675007629 + 13.0572359237 + 10.507334039 + 8.34317800627 = $46.38 Mil.
Total Current Assets was $34.19 Mil.
Total Assets was $286.38 Mil.
Property, Plant and Equipment(Net PPE) was $0.25 Mil.
Depreciation, Depletion and Amortization(DDA) was $28.20 Mil.
Selling, General & Admin. Expense(SGA) was $15.59 Mil.
Total Current Liabilities was $44.67 Mil.
Long-Term Debt was $83.15 Mil.
Net Income was -0.0503509307293 + -3.91887699705 + -2.59035233631 + -0.667250054693 = $-7.23 Mil.
Non Operating Income was -1.71116875191 + -0.515743756786 + 0.664600030243 + -1.48180558594 = $-3.04 Mil.
Cash Flow from Operations was 5.96505950565 + 1.20598728091 + 4.40949644639 + 5.01640778823 = $16.60 Mil.
Accounts Receivable was $10.29 Mil.
Revenue was 12.1694557515 + 7.68701981399 + 10.0491361547 + 9.21609434617 = $39.12 Mil.
Gross Profit was 9.13990652797 + 7.0303275374 + 8.90553178 + 8.12348248352 = $33.20 Mil.
Total Current Assets was $46.98 Mil.
Total Assets was $198.99 Mil.
Property, Plant and Equipment(Net PPE) was $0.09 Mil.
Depreciation, Depletion and Amortization(DDA) was $20.23 Mil.
Selling, General & Admin. Expense(SGA) was $9.06 Mil.
Total Current Liabilities was $19.46 Mil.
Long-Term Debt was $35.62 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)
=(20.8521513579 / 69.1367069958) / (10.2864465551 / 39.1217060664)
=0.30160753 / 0.26293451
=1.1471

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)
=(33.1992483289 / 39.1217060664) / (46.3752487319 / 69.1367069958)
=0.84861453 / 0.67077607
=1.2651

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 - (34.189807751 + 0.245651510528) / 286.378547452) / (1 - (46.9810040706 + 0.0897030001508) / 198.992914217)
=0.87975545 / 0.76345536
=1.1523

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
=69.1367069958 / 39.1217060664
=1.7672

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))
=(20.2320315294 / (20.2320315294 + 0.0897030001508)) / (28.1950800992 / (28.1950800992 + 0.245651510528))
=0.99558586 / 0.99136269
=1.0043

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)
=(15.5866217891 / 69.1367069958) / (9.05596765869 / 39.1217060664)
=0.2254464 / 0.23148192
=0.9739

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)
=((83.150747635 + 44.6658529143) / 286.378547452) / ((35.6158600935 + 19.464797226) / 198.992914217)
=0.44632044 / 0.27679708
=1.6124

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
=(-7.22683031878 - -3.04411806439 - 16.5969510212) / 286.378547452
=-0.0726

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.

Merus Labs International Inc has a M-score of -1.99 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 local exchange's currency.

Merus Labs International Inc Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 0.62751.82136.2170.0029149.79310.47850.61421.92731.0767
GMI 111111.10330.9921.10320.97881.2604
AQI 1.60010.86180.3481.03451.576813.36590.94121.10290.85671.1523
SGI 1.97260.62250.05091.988708.78312.90040.86531.55391.8827
DEPI 0.82070.87331.32970.90080.55630.3270.99811.00890.99481.0039
SGAI 0.54221.82364.71370.376110.20940.47641.37280.63230.9756
LVGI 1.44831.06790.70071.66230.45114.44930.8050.84940.65921.6124
TATA 0.0416-0.4064-0.69230.0715-0.4748-0.2363-0.1534-0.0703-0.0697-0.0783
M-score -1.61-4.20-2.53-2.29-5.2352.23-1.86-3.20-1.35-1.99

Merus Labs International Inc Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 0.15330.61521.21131.53841.98511.83760.93861.38291.70671.1471
GMI 1.15511.10381.05260.99880.93460.9761.04741.14061.26251.2651
AQI 0.61061.10291.07961.31281.62370.85670.86331.0681.1381.1523
SGI 1.19640.86381.00041.11941.18441.62971.51861.47831.8071.7672
DEPI 0.99961.00891.00671.00491.00450.99470.99660.99791.01031.0043
SGAI 1.18471.37291.0070.78260.73960.63290.8040.87340.81030.9739
LVGI 0.49320.84940.8721.13251.0580.65920.61821.11591.53931.6124
TATA -0.1221-0.0713-0.0494-0.0629-0.0611-0.061-0.0856-0.0637-0.061-0.0726
M-score -3.60-3.21-2.42-2.05-1.45-1.33-2.35-1.91-1.34-1.99
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