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Valeant Pharmaceuticals International Inc (NYSE:VRX)
Beneish M-Score
-2.41 (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 -2.52 suggests that the company is not a manipulator.

VRX' s 10-Year Beneish M-Score Range
Min: -3.2   Max: 0.78
Current: -2.41

-3.2
0.78

During the past 13 years, the highest Beneish M-Score of Valeant Pharmaceuticals International Inc was 0.78. The lowest was -3.20. And the median was -2.43.


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 * 0.8645+0.528 * 0.9211+0.404 * 0.9684+0.892 * 1.4322+0.115 * 1.088
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0839+4.679 * -0.0531-0.327 * 0.9702
=-2.52

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $2,076 Mil.
Revenue was 2280 + 2056.2 + 2041.1 + 1886.2 = $8,264 Mil.
Gross Profit was 1690.2 + 1495.4 + 1455.5 + 1367.8 = $6,009 Mil.
Total Current Assets was $4,193 Mil.
Total Assets was $26,353 Mil.
Property, Plant and Equipment(Net PPE) was $1,311 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,738 Mil.
Selling, General & Admin. Expense(SGA) was $2,026 Mil.
Total Current Liabilities was $2,731 Mil.
Long-Term Debt was $15,254 Mil.
Net Income was 534.9 + 275.4 + 125.8 + -22.6 = $914 Mil.
Non Operating Income was 169.7 + -49.6 + 5.9 + -107.1 = $19 Mil.
Cash Flow from Operations was 815.7 + 618.7 + 376 + 484.3 = $2,295 Mil.
Accounts Receivable was $1,676 Mil.
Revenue was 2063.8 + 1541.7 + 1095.7 + 1068.4 = $5,770 Mil.
Gross Profit was 1331.9 + 966.5 + 798 + 768.1 = $3,865 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 $2,513 Mil.
Long-Term Debt was $17,163 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)
=(2075.8 / 8263.5) / (1676.4 / 5769.6)
=0.25120106 / 0.2905574
=0.8645

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)
=(1495.4 / 5769.6) / (1690.2 / 8263.5)
=0.6698038 / 0.72716161
=0.9211

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 - (4193.1 + 1310.5) / 26353) / (1 - (3885.9 + 1234.2) / 27970.8)
=0.7911585 / 0.81694839
=0.9684

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
=8263.5 / 5769.6
=1.4322

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))
=(2015.8 / (2015.8 + 1234.2)) / (1737.6 / (1737.6 + 1310.5))
=0.62024615 / 0.57006004
=1.088

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)
=(2026.3 / 8263.5) / (1305.2 / 5769.6)
=0.24521087 / 0.22622019
=1.0839

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)
=((15253.7 + 2730.8) / 26353) / ((17162.9 + 2512.5) / 27970.8)
=0.68244602 / 0.70342643
=0.9702

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
=(913.5 - 18.9 - 2294.7) / 26353
=-0.0531

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 -2.52 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 own currency.

Valeant Pharmaceuticals International Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.83570.8561.08910.90211.14951.70170.81751.16241.31420.8645
GMI 0.95180.97911.09210.99321.00751.11820.93130.97721.0770.9211
AQI 0.79780.74621.11531.29221.29081.1230.98340.94760.99690.9684
SGI 1.06731.13790.78940.89841.08351.43982.08551.41281.65781.4322
DEPI 0.95371.12661.04740.72510.69471.24260.79550.87651.09741.088
SGAI 0.84031.13330.69551.53130.74761.27420.85120.91591.04131.0839
LVGI 0.91021.09210.55850.9881.49961.29341.44061.20911.02170.9702
TATA -0.1095-0.0684-0.02690.0007-0.0981-0.0397-0.0375-0.0431-0.0658-0.0531
M-score -3.14-2.96-2.41-2.66-2.76-1.63-2.04-2.27-1.88-2.52

Valeant Pharmaceuticals International Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 1.25971.16241.28161.37781.43351.31420.90730.82770.65780.8645
GMI 0.94120.97720.94080.95871.01781.0771.09271.0830.99590.9211
AQI 0.96590.94760.97940.87610.96840.99690.97251.02530.96170.9684
SGI 1.4191.41281.34061.33831.42391.65781.78391.89831.73961.4322
DEPI 0.90840.87650.87510.90331.08311.09741.12651.1791.091.088
SGAI 0.95020.91590.9760.87680.91931.04131.05961.13691.1191.0839
LVGI 1.18481.20911.19431.02941.1631.02171.02851.13580.98110.9702
TATA -0.0558-0.0431-0.0476-0.0429-0.0661-0.0658-0.0705-0.0696-0.0393-0.0531
M-score -2.24-2.27-2.25-2.10-2.05-1.88-2.16-2.16-2.34-2.52
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