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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.
During the past 13 years, the highest Beneish M-Score of Valeant Pharmaceuticals International Inc was 2.53. The lowest was -3.73. And the median was -2.29.
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 * 1.0258||+||0.528 * 0.998||+||0.404 * 1.0076||+||0.892 * 1.1235||+||0.115 * 0.8583|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1378||+||4.679 * -0.0685||-||0.327 * 1.0266|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $2,733 Mil.|
Revenue was 2420.2 + 2371.6 + 2736.4 + 2786.8 = $10,315 Mil.
Gross Profit was 1762.4 + 1741.7 + 2059.7 + 2138.6 = $7,702 Mil.
Total Current Assets was $5,818 Mil.
Total Assets was $47,662 Mil.
Property, Plant and Equipment(Net PPE) was $1,472 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,267 Mil.
Selling, General & Admin. Expense(SGA) was $2,925 Mil.
Total Current Liabilities was $4,226 Mil.
Long-Term Debt was $30,773 Mil.
Net Income was -302.3 + -373.7 + -361.9 + 49.5 = $-988 Mil.
Non Operating Income was 13.1 + -6.2 + -3.3 + -34 = $-30 Mil.
Cash Flow from Operations was 448.1 + 558.1 + 562.4 + 736.5 = $2,305 Mil.
|Accounts Receivable was $2,371 Mil.
Revenue was 2732.4 + 2170.1 + 2222.5 + 2056.2 = $9,181 Mil.
Gross Profit was 2047.3 + 1647.9 + 1651.2 + 1495.4 = $6,842 Mil.
Total Current Assets was $6,345 Mil.
Total Assets was $48,343 Mil.
Property, Plant and Equipment(Net PPE) was $1,360 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,971 Mil.
Selling, General & Admin. Expense(SGA) was $2,288 Mil.
Total Current Liabilities was $4,291 Mil.
Long-Term Debt was $30,290 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(2732.5 / 10315)||/||(2371 / 9181.2)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(6841.8 / 9181.2)||/||(7702.4 / 10315)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (5818.4 + 1472.1) / 47662.2)||/||(1 - (6345.2 + 1359.9) / 48343.2)|
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.
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))|
|=||(1970.8 / (1970.8 + 1359.9))||/||(3267.4 / (3267.4 + 1472.1))|
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)|
|=||(2924.6 / 10315)||/||(2287.9 / 9181.2)|
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)|
|=||((30773.2 + 4226.4) / 47662.2)||/||((30290.2 + 4291) / 48343.2)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(-988.4 - -30.4||-||2305.1)||/||47662.2|
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 -2.71 suggests that the company will not be a manipulator.
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
Valeant Pharmaceuticals International Inc Annual Data
Valeant Pharmaceuticals International Inc Quarterly Data