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Valeant Pharmaceuticals International Inc (NYSE:VRX)
Beneish M-Score
-2.06 (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 -2.16 signals that the company is a manipulator.

VRX' s 10-Year Beneish M-Score Range
Min: -4.06   Max: 2.53
Current: -2.06

-4.06
2.53

During the past 13 years, the highest Beneish M-Score of Valeant Pharmaceuticals International Inc was 2.53. The lowest was -4.06. And the median was -2.41.


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 * 0.8277+0.528 * 1.0831+0.404 * 1.0253+0.892 * 1.8982+0.115 * 1.179
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1333+4.679 * -0.0696-0.327 * 1.1358
=-2.16

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $1,771 Mil.
Revenue was 2041.1 + 1886.2 + 2063.757 + 1541.731 = $7,533 Mil.
Gross Profit was 1455.5 + 1367.8 + 1331.82 + 966.523 = $5,122 Mil.
Total Current Assets was $5,164 Mil.
Total Assets was $27,896 Mil.
Property, Plant and Equipment(Net PPE) was $1,320 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,165 Mil.
Selling, General & Admin. Expense(SGA) was $1,798 Mil.
Total Current Liabilities was $2,496 Mil.
Long-Term Debt was $17,059 Mil.
Net Income was 125.8 + -22.6 + 123.765 + -973.243 = $-746 Mil.
Non Operating Income was 5.9 + -107.1 + -41.375 + -3.082 = $-146 Mil.
Cash Flow from Operations was 376 + 484.3 + 279.868 + 201.712 = $1,342 Mil.
Accounts Receivable was $1,127 Mil.
Revenue was 1095.7 + 1068.4 + 920.043 + 884.14 = $3,968 Mil.
Gross Profit was 798 + 768.1 + 702.202 + 653.888 = $2,922 Mil.
Total Current Assets was $4,532 Mil.
Total Assets was $19,782 Mil.
Property, Plant and Equipment(Net PPE) was $441 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,208 Mil.
Selling, General & Admin. Expense(SGA) was $836 Mil.
Total Current Liabilities was $1,762 Mil.
Long-Term Debt was $10,447 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)
=(1770.7 / 7532.788) / (1127.006 / 3968.283)
=0.23506569 / 0.28400343
=0.8277

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)
=(1367.8 / 3968.283) / (1455.5 / 7532.788)
=0.73638649 / 0.67991333
=1.0831

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 - (5163.7 + 1319.6) / 27895.6) / (1 - (4532.026 + 440.998) / 19782.258)
=0.767587 / 0.74861191
=1.0253

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
=7532.788 / 3968.283
=1.8982

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))
=(1208.074 / (1208.074 + 440.998)) / (2165.307 / (2165.307 + 1319.6))
=0.73257808 / 0.62133853
=1.179

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)
=(1798.02 / 7532.788) / (835.778 / 3968.283)
=0.2386925 / 0.21061452
=1.1333

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)
=((17058.8 + 2496.3) / 27895.6) / ((10447.23 + 1761.818) / 19782.258)
=0.7010102 / 0.61717161
=1.1358

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
=(-746.278 - -145.657 - 1341.88) / 27895.6
=-0.0696

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 -2.16 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 0.7770.83570.8561.08910.90211.14951.70170.81751.16241.3142
GMI 1.11120.95180.97911.09210.99321.2250.91960.93130.97721.077
AQI 0.94930.79780.74621.11531.29221.2861.12720.98340.94760.9969
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 0.97850.84031.13330.69551.53130.79331.20080.85120.91591.0413
LVGI 0.840.91021.09210.55850.9881.51241.28251.44061.20911.0217
TATA -0.04-0.1095-0.0684-0.02690.0007-0.098-0.0397-0.0375-0.0431-0.0658
M-score -2.62-3.14-2.96-2.41-2.66-2.66-1.72-2.04-2.27-1.88

Valeant Pharmaceuticals International Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.72180.95021.25971.16241.28161.37781.43351.31420.90730.8277
GMI 0.9250.92950.94120.97720.94080.95871.01781.0771.09271.0831
AQI 0.99030.9660.96590.94760.97940.87610.96840.99690.97251.0253
SGI 1.80431.56291.4191.41281.34061.33831.42391.65771.78391.8982
DEPI 0.8460.86210.90840.87650.87510.90331.08311.09741.12651.179
SGAI 0.75090.81360.95020.91590.9760.87681.05641.03681.05571.1333
LVGI 1.25011.34021.18481.20911.19431.02941.1631.02171.02851.1358
TATA -0.0457-0.0537-0.0558-0.0431-0.0476-0.0429-0.0661-0.0658-0.0705-0.0696
M-score -2.33-2.42-2.24-2.27-2.25-2.10-2.07-1.87-2.16-2.16
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