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GuruFocus has detected 2 Warning Signs with Novo Nordisk A/S $NVO.
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Novo Nordisk A/S (NYSE:NVO)
Beneish M-Score
-2.86 (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.

Novo Nordisk A/S has a M-score of -2.92 suggests that the company is not a manipulator.

NVO' s Beneish M-Score Range Over the Past 10 Years
Min: -3.01   Max: -0.58
Current: -2.86

-3.01
-0.58

During the past 13 years, the highest Beneish M-Score of Novo Nordisk A/S was -0.58. The lowest was -3.01. And the median was -2.70.


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 Novo Nordisk A/S 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 * 1.2253+0.528 * 1.0043+0.404 * 0.6431+0.892 * 1.0362+0.115 * 1.0593
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9697+4.679 * -0.1119-0.327 * 1.0923
=-2.92

* 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 $2,869 Mil.
Revenue was 4193.18246271 + 4147.76321735 + 4147.25872225 + 4062.34138477 = $16,551 Mil.
Gross Profit was 3495.8312064 + 3547.37159211 + 3536.32381815 + 3430.26901144 = $14,010 Mil.
Total Current Assets was $8,475 Mil.
Total Assets was $13,831 Mil.
Property, Plant and Equipment(Net PPE) was $4,279 Mil.
Depreciation, Depletion and Amortization(DDA) was $471 Mil.
Selling, General & Admin. Expense(SGA) was $4,784 Mil.
Total Current Liabilities was $6,726 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1233.48080086 + 1476.57779786 + 1505.51276242 + 1411.48896784 = $5,627 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1581.44745051 + 2287.8445549 + 2189.54840659 + 1115.90481593 = $7,175 Mil.
Accounts Receivable was $2,260 Mil.
Revenue was 4213.62906756 + 4032.08572246 + 4071.47156184 + 3654.61031992 = $15,972 Mil.
Gross Profit was 3541.22282212 + 3453.12805695 + 3490.8215468 + 3092.78649534 = $13,578 Mil.
Total Current Assets was $8,046 Mil.
Total Assets was $13,395 Mil.
Property, Plant and Equipment(Net PPE) was $3,728 Mil.
Depreciation, Depletion and Amortization(DDA) was $437 Mil.
Selling, General & Admin. Expense(SGA) was $4,761 Mil.
Total Current Liabilities was $5,964 Mil.
Long-Term Debt was $0 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)
=(2869.09420906 / 16550.5457871) / (2259.59433825 / 15971.7966718)
=0.17335345 / 0.14147402
=1.2253

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)
=(13577.9589212 / 15971.7966718) / (14009.7956281 / 16550.5457871)
=0.85012095 / 0.84648542
=1.0043

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 - (8474.56185128 + 4279.25245307) / 13830.6108559) / (1 - (8046.11119218 + 3727.56457026) / 13395.4472494)
=0.07785604 / 0.12106886
=0.6431

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
=16550.5457871 / 15971.7966718
=1.0362

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))
=(437.027525405 / (437.027525405 + 3727.56457026)) / (470.549663481 / (470.549663481 + 4279.25245307))
=0.10493885 / 0.09906721
=1.0593

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)
=(4783.85669639 / 16550.5457871) / (4760.65952726 / 15971.7966718)
=0.28904525 / 0.29806662
=0.9697

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)
=((0 + 6726.22086098) / 13830.6108559) / ((0 + 5964.24923391) / 13395.4472494)
=0.48632855 / 0.4452445
=1.0923

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
=(5627.06032899 - 0 - 7174.74522793) / 13830.6108559
=-0.1119

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.

Novo Nordisk A/S has a M-score of -2.92 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.

Novo Nordisk A/S Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.09280.99160.95741.01141.00750.87671.05651.12520.9771.2616
GMI 0.98260.98430.97790.98490.9970.97920.99590.99380.98351.0044
AQI 1.02240.71450.90921.12681.10030.93591.50551.08911.22230.6431
SGI 1.1911.01121.21011.07791.08871.1691.11920.95821.07031.0064
DEPI 0.71571.14750.98961.09090.92861.04060.980.87721.24531.085
SGAI 0.98460.97431.02750.98260.95870.94991.010.93660.98920.9706
LVGI 0.95861.1330.9541.17631.06411.00171.04531.26931.01851.0923
TATA -0.0731-0.0624-0.0832-0.1057-0.06980.0144-0.0256-0.06170.0275-0.1001
M-score -2.58-2.92-2.76-2.90-2.70-2.40-2.26-2.75-2.20-2.86

Novo Nordisk A/S Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.01031.02851.07221.00051.07111.02381.0991.05871.14431.2253
GMI 0.9940.99420.99220.98370.98580.98320.98850.99811.00151.0043
AQI 1.33821.08911.2591.111.08551.22230.90390.75860.7560.6431
SGI 1.06391.04831.02031.01811.01811.02141.05521.05131.04671.0362
DEPI 000.20110.42250.93991.29311.43321.37251.11821.0593
SGAI 0.96660.93450.94630.96320.960.99061.00060.98350.98360.9697
LVGI 1.11871.26931.29871.27271.07331.01850.91990.99131.05321.0923
TATA -0.0662-0.0628-0.0363-0.0611-0.02490.0246-0.0172-0.0262-0.0458-0.1119
M-score -2.74-2.86-2.65-2.86-2.51-2.21-2.39-2.55-2.62-2.92
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