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Valeant Pharmaceuticals International Inc (NYSE:VRX)
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.

Valeant Pharmaceuticals International Inc has a M-score of -1.98 signals that the company is a manipulator.

VRX' s 10-Year Beneish M-Score Range
Min: -3.14   Max: 0.72
Current: -1.98

-3.14
0.72

During the past 13 years, the highest Beneish M-Score of Valeant Pharmaceuticals International Inc was 0.72. The lowest was -3.14. And the median was -2.29.


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 Valeant Pharmaceuticals 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 * 1.1979+0.528 * 1.077+0.404 * 0.9969+0.892 * 1.6578+0.115 * 1.0974
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0413+4.679 * -0.0658-0.327 * 1.0217
=-1.98

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $1,815 Mil.
Revenue was 2063.757 + 1541.731 + 1095.762 + 1068.355 = $5,770 Mil.
Gross Profit was 1331.82 + 966.523 + 798.12 + 768.022 = $3,864 Mil.
Total Current Assets was $3,886 Mil.
Total Assets was $27,971 Mil.
Property, Plant and Equipment(Net PPE) was $1,234 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,016 Mil.
Selling, General & Admin. Expense(SGA) was $1,305 Mil.
Total Current Liabilities was $2,512 Mil.
Long-Term Debt was $17,163 Mil.
Net Income was 123.765 + -973.243 + 10.866 + -27.53 = $-866 Mil.
Non Operating Income was -41.375 + -3.082 + -6.119 + -18.081 = $-69 Mil.
Cash Flow from Operations was 279.868 + 201.712 + 305.028 + 255.349 = $1,042 Mil.
Accounts Receivable was $914 Mil.
Revenue was 920.043 + 884.14 + 820.09 + 856.103 = $3,480 Mil.
Gross Profit was 702.202 + 653.888 + 610.323 + 544.267 = $2,511 Mil.
Total Current Assets was $2,777 Mil.
Total Assets was $17,950 Mil.
Property, Plant and Equipment(Net PPE) was $463 Mil.
Depreciation, Depletion and Amortization(DDA) was $986 Mil.
Selling, General & Admin. Expense(SGA) was $756 Mil.
Total Current Liabilities was $1,823 Mil.
Long-Term Debt was $10,535 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)
=(1814.769 / 5769.605) / (913.835 / 3480.376)
=0.31453956 / 0.26256789
=1.1979

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)
=(966.523 / 3480.376) / (1331.82 / 5769.605)
=0.72138183 / 0.66980062
=1.077

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 - (3885.889 + 1234.236) / 27970.797) / (1 - (2777.451 + 462.724) / 17950.379)
=0.81694748 / 0.81949267
=0.9969

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
=5769.605 / 3480.376
=1.6578

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))
=(986.222 / (986.222 + 462.724)) / (2015.806 / (2015.806 + 1234.236))
=0.68064786 / 0.62023998
=1.0974

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)
=(1305.164 / 5769.605) / (756.083 / 3480.376)
=0.22621375 / 0.21724176
=1.0413

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)
=((17162.946 + 2512.396) / 27970.797) / ((10535.443 + 1822.752) / 17950.379)
=0.70342443 / 0.68846429
=1.0217

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
=(-866.142 - -68.657 - 1041.957) / 27970.797
=-0.0658

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.

Valeant Pharmaceuticals International Inc has a M-score of -1.98 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 own currency.

Valeant Pharmaceuticals International Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.7770.83570.8561.70610.58111.13931.75280.96431.13621.1979
GMI 1.11120.95180.97911.09210.99321.00751.11820.93130.97721.077
AQI 0.94930.79780.74621.11531.29221.29081.1230.98340.94760.9969
SGI 1.06731.06731.13790.78940.89841.08351.43982.08551.41281.6578
DEPI 1.81320.95371.12661.04740.72510.69471.24260.79550.87651.0974
SGAI 0.97850.84031.13330.69551.53130.74761.27420.85120.91591.0413
LVGI 0.840.91021.09210.55850.9881.49961.29341.44061.20911.0217
TATA -0.04-0.1095-0.0684-0.02690.0007-0.0981-0.0397-0.0375-0.0431-0.0658
M-score -2.62-3.14-2.96-1.85-2.96-2.77-1.58-1.91-2.29-1.98

Valeant Pharmaceuticals International Inc Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.63720.96430.70430.89841.21251.13621.28161.37781.43351.1979
GMI 1.05740.93130.92130.92910.94120.97720.94080.95871.01781.077
AQI 1.0220.98340.99030.9660.96590.94760.97940.87610.96840.9969
SGI 2.52232.08551.80431.56291.4191.41281.34061.33831.42391.6578
DEPI 0.62690.79550.8460.86210.90840.87650.8750.90331.08311.0974
SGAI 1.00860.85120.81380.85640.95020.91590.98130.88271.06161.0413
LVGI 1.43971.44061.25011.34021.18481.20911.19431.02941.1631.0217
TATA -0.0283-0.0375-0.0457-0.0537-0.0558-0.0431-0.0476-0.0429-0.0661-0.0658
M-score -1.74-1.91-2.36-2.48-2.28-2.29-2.25-2.10-2.07-1.98
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