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GuruFocus has detected 1 Warning Sign with Valeant Pharmaceuticals International Inc $VRX.
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Valeant Pharmaceuticals International Inc (NYSE:VRX)
Beneish M-Score
-3.07 (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 -3.05 suggests that the company is not a manipulator.

VRX' s Beneish M-Score Range Over the Past 10 Years
Min: -3.4   Max: 1.48
Current: -3.07

-3.4
1.48

During the past 13 years, the highest Beneish M-Score of Valeant Pharmaceuticals International Inc was 1.48. The lowest was -3.40. And the median was -2.30.


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 * 1.0116+0.528 * 1.0308+0.404 * 0.9943+0.892 * 0.926+0.115 * 0.92
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1239+4.679 * -0.1023-0.327 * 1.0577
=-3.05

* 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 $2,517 Mil.
Revenue was 2402.6 + 2479.6 + 2420.2 + 2371.6 = $9,674 Mil.
Gross Profit was 1737.3 + 1821.6 + 1762.4 + 1741.7 = $7,063 Mil.
Total Current Assets was $5,077 Mil.
Total Assets was $43,529 Mil.
Property, Plant and Equipment(Net PPE) was $1,312 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,866 Mil.
Selling, General & Admin. Expense(SGA) was $2,810 Mil.
Total Current Liabilities was $3,609 Mil.
Long-Term Debt was $29,845 Mil.
Net Income was -514.6 + -1218.4 + -302.3 + -373.7 = $-2,409 Mil.
Non Operating Income was -45.6 + -2.3 + 13.1 + -6.2 = $-41 Mil.
Cash Flow from Operations was 512.5 + 568.3 + 448.1 + 558.1 = $2,087 Mil.
Accounts Receivable was $2,687 Mil.
Revenue was 2757.7 + 2786.8 + 2732.4 + 2170.1 = $10,447 Mil.
Gross Profit was 2028.2 + 2138.6 + 2047.3 + 1647.9 = $7,862 Mil.
Total Current Assets was $5,507 Mil.
Total Assets was $48,965 Mil.
Property, Plant and Equipment(Net PPE) was $1,442 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,467 Mil.
Selling, General & Admin. Expense(SGA) was $2,700 Mil.
Total Current Liabilities was $5,313 Mil.
Long-Term Debt was $30,265 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)
=(2517 / 9674) / (2687 / 10447)
=0.26018193 / 0.25720302
=1.0116

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)
=(7862 / 10447) / (7063 / 9674)
=0.75256054 / 0.7301013
=1.0308

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 - (5077 + 1312) / 43529) / (1 - (5507 + 1442) / 48965)
=0.85322429 / 0.8580823
=0.9943

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
=9674 / 10447
=0.926

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))
=(2467 / (2467 + 1442)) / (2866 / (2866 + 1312))
=0.6311077 / 0.68597415
=0.92

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)
=(2810 / 9674) / (2700 / 10447)
=0.2904693 / 0.2584474
=1.1239

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)
=((29845 + 3609) / 43529) / ((30265 + 5313) / 48965)
=0.76854511 / 0.72660063
=1.0577

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
=(-2409 - -41 - 2087) / 43529
=-0.1023

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 -3.05 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.

Valeant Pharmaceuticals International Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.08910.90211.14951.70170.82961.14541.31420.87061.01681.0116
GMI 1.09210.99321.00751.11820.92050.98871.0770.92070.96671.0308
AQI 1.11531.29221.29081.1230.98340.94760.99690.97071.0820.9943
SGI 0.78940.89841.08351.43982.0551.43381.65771.42231.27310.926
DEPI 1.04740.72510.69471.24260.79550.87651.09741.12460.87390.92
SGAI 0.69551.53130.74761.27420.84630.92121.04131.09141.04681.1239
LVGI 0.55850.9881.49961.29341.44061.20911.02170.96941.06561.0577
TATA -0.08490.0007-0.0981-0.0397-0.0376-0.0431-0.0658-0.0551-0.0495-0.1023
M-score -2.69-2.66-2.76-1.63-2.06-2.26-1.88-2.53-2.48-3.05

Valeant Pharmaceuticals International Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.65780.87060.9591.09861.16431.01681.0181.02370.99271.0116
GMI 0.99590.92070.92050.91240.92980.96670.98531.00411.02991.0308
AQI 0.96170.97070.6691.09511.04931.0821.54521.00761.01970.9943
SGI 1.73961.42231.28881.21881.23171.27311.25431.12581.01180.926
DEPI 1.091.12461.15051.07880.91540.87390.83450.84890.88940.92
SGAI 1.1191.09141.06341.04061.03191.04681.10641.13571.15041.1239
LVGI 0.98110.96941.06761.02041.03851.06560.97411.02661.04231.0577
TATA -0.0393-0.0551-0.0351-0.0324-0.0397-0.0491-0.0618-0.0697-0.0973-0.1023
M-score -2.34-2.53-2.62-2.36-2.35-2.48-2.34-2.72-2.96-3.05
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