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Valeant Pharmaceuticals International Inc (NYSE:VRX)
Beneish M-Score
-2.24 (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 -2.34 suggests that the company is not a manipulator.

VRX' s 10-Year Beneish M-Score Range
Min: -3.58   Max: 2.53
Current: -2.24

-3.58
2.53

During the past 13 years, the highest Beneish M-Score of Valeant Pharmaceuticals International Inc was 2.53. The lowest was -3.58. 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 * 0.6578+0.528 * 0.9959+0.404 * 0.9617+0.892 * 1.7396+0.115 * 1.09
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.119+4.679 * -0.0393-0.327 * 0.9811
=-2.34

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $1,880 Mil.
Revenue was 2056.2 + 2041.1 + 1886.2 + 2063.805 = $8,047 Mil.
Gross Profit was 1495.4 + 1455.5 + 1367.8 + 1331.885 = $5,651 Mil.
Total Current Assets was $4,414 Mil.
Total Assets was $27,060 Mil.
Property, Plant and Equipment(Net PPE) was $1,300 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,659 Mil.
Selling, General & Admin. Expense(SGA) was $1,952 Mil.
Total Current Liabilities was $3,143 Mil.
Long-Term Debt was $15,584 Mil.
Net Income was 275.4 + 125.8 + -22.6 + 123.758 = $502 Mil.
Non Operating Income was -49.6 + 5.9 + -107.1 + -41.357 = $-192 Mil.
Cash Flow from Operations was 618.7 + 376 + 484.3 + 279.857 = $1,759 Mil.
Accounts Receivable was $1,643 Mil.
Revenue was 1541.7 + 1095.7 + 1068.4 + 920.043 = $4,626 Mil.
Gross Profit was 966.5 + 798 + 768.1 + 702.202 = $3,235 Mil.
Total Current Assets was $3,848 Mil.
Total Assets was $28,204 Mil.
Property, Plant and Equipment(Net PPE) was $1,222 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,919 Mil.
Selling, General & Admin. Expense(SGA) was $1,003 Mil.
Total Current Liabilities was $2,853 Mil.
Long-Term Debt was $17,044 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)
=(1880.2 / 8047.305) / (1643.148 / 4625.843)
=0.23364344 / 0.3552105
=0.6578

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)
=(1455.5 / 4625.843) / (1495.4 / 8047.305)
=0.69928919 / 0.7021711
=0.9959

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 - (4413.7 + 1300.4) / 27059.6) / (1 - (3848.363 + 1221.606) / 28204.384)
=0.7888328 / 0.82024181
=0.9617

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
=8047.305 / 4625.843
=1.7396

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))
=(1918.763 / (1918.763 + 1221.606)) / (1658.606 / (1658.606 + 1300.4))
=0.61099922 / 0.5605281
=1.09

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)
=(1952.064 / 8047.305) / (1002.818 / 4625.843)
=0.24257363 / 0.216786
=1.119

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)
=((15584.3 + 3143.3) / 27059.6) / ((17043.75 + 2853.082) / 28204.384)
=0.6920871 / 0.70545175
=0.9811

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
=(502.358 - -192.157 - 1758.857) / 27059.6
=-0.0393

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 -2.34 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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.7770.83570.8561.08910.90211.14951.70170.81751.16241.3142
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 -2.62-3.14-2.96-2.41-2.66-2.76-1.63-2.04-2.27-1.88

Valeant Pharmaceuticals International Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.95021.25971.16241.28161.37781.43351.31420.90730.82770.6578
GMI 0.92910.94120.97720.94080.95871.01781.0771.09271.08310.9959
AQI 0.9660.96590.94760.97940.87610.96840.99690.97251.02530.9617
SGI 1.56291.4191.41281.34061.33831.42391.65781.78391.89831.7396
DEPI 0.86210.90840.87650.87510.90331.08311.09741.12651.1791.09
SGAI 0.85640.95020.91590.9760.87680.91931.04131.05951.13691.119
LVGI 1.34021.18481.20911.19431.02941.1631.02171.02851.13580.9811
TATA -0.0537-0.0558-0.0431-0.0476-0.0429-0.0661-0.0658-0.0705-0.0696-0.0393
M-score -2.43-2.24-2.27-2.25-2.10-2.05-1.88-2.16-2.16-2.34
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