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GuruFocus has detected 5 Warning Signs with Teva Pharmaceutical Industries Ltd $TEVA.
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Teva Pharmaceutical Industries Ltd (NYSE:TEVA)
Beneish M-Score
-2.26 (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.

Teva Pharmaceutical Industries Ltd has a M-score of -2.26 suggests that the company is not a manipulator.

TEVA' s Beneish M-Score Range Over the Past 10 Years
Min: -2.87   Max: -1.77
Current: -2.26

-2.87
-1.77

During the past 13 years, the highest Beneish M-Score of Teva Pharmaceutical Industries Ltd was -1.77. The lowest was -2.87. And the median was -2.35.


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 Teva Pharmaceutical Industries Ltd 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 * 1.2617+0.528 * 1.0673+0.404 * 1.352+0.892 * 1.1145+0.115 * 1.049
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.855+4.679 * -0.0443-0.327 * 1.394
=-2.26

* 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 $7,523 Mil.
Revenue was 6492 + 5563 + 5038 + 4810 = $21,903 Mil.
Gross Profit was 3390 + 2801 + 2877 + 2791 = $11,859 Mil.
Total Current Assets was $16,961 Mil.
Total Assets was $92,890 Mil.
Property, Plant and Equipment(Net PPE) was $8,073 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,524 Mil.
Selling, General & Admin. Expense(SGA) was $5,096 Mil.
Total Current Liabilities was $18,519 Mil.
Long-Term Debt was $32,524 Mil.
Net Income was -973 + 412 + 254 + 636 = $329 Mil.
Non Operating Income was -784 + 0 + 0 + 0 = $-784 Mil.
Cash Flow from Operations was 1425 + 1461 + 963 + 1376 = $5,225 Mil.
Accounts Receivable was $5,350 Mil.
Revenue was 4881 + 4823 + 4966 + 4982 = $19,652 Mil.
Gross Profit was 2847 + 2771 + 2902 + 2836 = $11,356 Mil.
Total Current Assets was $18,398 Mil.
Total Assets was $54,258 Mil.
Property, Plant and Equipment(Net PPE) was $6,544 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,308 Mil.
Selling, General & Admin. Expense(SGA) was $5,348 Mil.
Total Current Liabilities was $13,005 Mil.
Long-Term Debt was $8,383 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)
=(7523 / 21903) / (5350 / 19652)
=0.34346893 / 0.27223692
=1.2617

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)
=(11356 / 19652) / (11859 / 21903)
=0.57785467 / 0.54143268
=1.0673

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 - (16961 + 8073) / 92890) / (1 - (18398 + 6544) / 54258)
=0.73049844 / 0.54030742
=1.352

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
=21903 / 19652
=1.1145

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))
=(1308 / (1308 + 6544)) / (1524 / (1524 + 8073))
=0.16658176 / 0.15879962
=1.049

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)
=(5096 / 21903) / (5348 / 19652)
=0.23266219 / 0.27213515
=0.855

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)
=((32524 + 18519) / 92890) / ((8383 + 13005) / 54258)
=0.54949941 / 0.39419072
=1.394

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
=(329 - -784 - 5225) / 92890
=-0.0443

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.

Teva Pharmaceutical Industries Ltd has a M-score of -2.26 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.

Teva Pharmaceutical Industries Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.08461.11370.86030.94070.99880.80830.95811.01521.02051.2617
GMI 0.97710.96291.01570.94261.08220.99110.99470.96640.94381.0673
AQI 0.90731.14610.981.07681.04030.93071.03530.96070.9841.352
SGI 1.11891.17831.25391.15991.13591.10950.99990.99790.96941.1145
DEPI 0.95711.45920.60541.06061.20210.71571.07311.05811.12551.049
SGAI 1.08071.12111.11130.94451.01291.04581.03960.95671.08640.855
LVGI 0.88061.14410.82711.02691.32751.0120.96790.95490.87741.394
TATA -0.0008-0.0789-0.0414-0.0211-0.0274-0.0509-0.0396-0.0444-0.036-0.0443
M-score -2.33-2.56-2.58-2.48-2.51-2.87-2.68-2.68-2.65-2.26

Teva Pharmaceutical Industries Ltd Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.02181.01521.05251.05171.00411.02050.97930.99591.50341.2617
GMI 0.97720.96640.95830.93480.94230.94380.9520.9821.02511.0673
AQI 0.97770.96070.92831.07381.08940.9841.07780.93321.20991.352
SGI 1.01990.99790.99210.98240.9710.96940.96180.96921.01771.1145
DEPI 1.01851.05811.07861.10221.12131.12551.14361.11731.12131.049
SGAI 0.97210.95670.95430.97070.95781.08641.08961.10571.11630.855
LVGI 0.94650.95491.00851.06021.05240.87740.83870.81441.14851.394
TATA -0.0401-0.0512-0.0667-0.0732-0.0389-0.0691-0.065-0.0592-0.0597-0.0443
M-score -2.63-2.71-2.79-2.80-2.67-2.81-2.78-2.77-2.24-2.26
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