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GuruFocus has detected 2 Warning Signs with Nielsen Holdings PLC $NLSN.
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Nielsen Holdings PLC (NYSE:NLSN)
Beneish M-Score
-2.68 (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.

Nielsen Holdings PLC has a M-score of -2.68 suggests that the company is not a manipulator.

NLSN' s Beneish M-Score Range Over the Past 10 Years
Min: -2.78   Max: -2.43
Current: -2.68

-2.78
-2.43

During the past 9 years, the highest Beneish M-Score of Nielsen Holdings PLC was -2.43. The lowest was -2.78. And the median was -2.58.


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 Nielsen Holdings PLC 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 * 1.0147+0.528 * 1.0022+0.404 * 1.0067+0.892 * 1.0237+0.115 * 0.9601
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9552+4.679 * -0.0476-0.327 * 1.0438
=-2.68

* 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 $1,287 Mil.
Revenue was 1526 + 1656 + 1570 + 1596 = $6,348 Mil.
Gross Profit was 865 + 986 + 928 + 942 = $3,721 Mil.
Total Current Assets was $2,101 Mil.
Total Assets was $16,332 Mil.
Property, Plant and Equipment(Net PPE) was $464 Mil.
Depreciation, Depletion and Amortization(DDA) was $611 Mil.
Selling, General & Admin. Expense(SGA) was $1,857 Mil.
Total Current Liabilities was $1,635 Mil.
Long-Term Debt was $8,180 Mil.
Net Income was 71 + 159 + 130 + 113 = $473 Mil.
Non Operating Income was -2 + 5 + 2 + -4 = $1 Mil.
Cash Flow from Operations was 40 + 543 + 456 + 210 = $1,249 Mil.
Accounts Receivable was $1,239 Mil.
Revenue was 1487 + 1624 + 1531 + 1559 = $6,201 Mil.
Gross Profit was 846 + 970 + 916 + 911 = $3,643 Mil.
Total Current Assets was $2,054 Mil.
Total Assets was $15,588 Mil.
Property, Plant and Equipment(Net PPE) was $482 Mil.
Depreciation, Depletion and Amortization(DDA) was $579 Mil.
Selling, General & Admin. Expense(SGA) was $1,899 Mil.
Total Current Liabilities was $1,504 Mil.
Long-Term Debt was $7,471 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)
=(1287 / 6348) / (1239 / 6201)
=0.20274102 / 0.19980648
=1.0147

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)
=(3643 / 6201) / (3721 / 6348)
=0.58748589 / 0.58616887
=1.0022

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 - (2101 + 464) / 16332) / (1 - (2054 + 482) / 15588)
=0.84294636 / 0.83731075
=1.0067

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
=6348 / 6201
=1.0237

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))
=(579 / (579 + 482)) / (611 / (611 + 464))
=0.54571159 / 0.56837209
=0.9601

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)
=(1857 / 6348) / (1899 / 6201)
=0.29253308 / 0.30624093
=0.9552

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)
=((8180 + 1635) / 16332) / ((7471 + 1504) / 15588)
=0.60096743 / 0.57576341
=1.0438

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
=(473 - 1 - 1249) / 16332
=-0.0476

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.

Nielsen Holdings PLC has a M-score of -2.68 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.

Nielsen Holdings PLC Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.0151.02471.01281.02160.94111.01390.9276
GMI 0.99070.99211.00141.01550.99350.9911.0031
AQI 0.99670.99921.00410.97621.0091.01110.9828
SGI 1.06611.03941.01481.05471.10260.98161.0222
DEPI 1.00891.03750.96550.9990.93030.96030.9609
SGAI 1.01491.06780.92880.99810.95791.01770.9456
LVGI 1.00180.8210.95480.94471.03681.06271.0417
TATA -0.0306-0.0233-0.0258-0.0082-0.0351-0.0532-0.0506
M-score -2.56-2.48-2.55-2.43-2.62-2.76-2.78

Nielsen Holdings PLC Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.94110.92440.94720.99161.01391.07041.06731.04990.92761.0147
GMI 0.99350.9940.98730.98370.9910.99490.99631.00371.00311.0022
AQI 1.0090.99010.99080.99231.01111.00571.01161.00980.98281.0067
SGI 1.10261.06541.02320.98640.98160.99111.00261.01551.02221.0237
DEPI 0.93030.94950.95830.95750.96030.96850.96480.98980.96090.9601
SGAI 0.95790.96230.96810.98191.01771.00371.00590.99410.94560.9552
LVGI 1.03681.08161.09531.10781.06271.03061.04821.03021.04171.0438
TATA -0.0351-0.0356-0.0385-0.0434-0.0532-0.0506-0.0476-0.0483-0.0506-0.0476
M-score -2.62-2.69-2.73-2.75-2.76-2.67-2.66-2.65-2.78-2.68
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