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GuruFocus has detected 3 Warning Signs with Allergan PLC $AGN.
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Allergan PLC (NYSE:AGN)
Beneish M-Score
-2.03 (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.

Allergan PLC has a M-score of -2.03 signals that the company is a manipulator.

AGN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.56   Max: 3.71
Current: -2.03

-3.56
3.71

During the past 13 years, the highest Beneish M-Score of Allergan PLC was 3.71. The lowest was -3.56. And the median was -2.46.


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 Allergan PLC 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 * 0.9167+0.528 * 0.9228+0.404 * 0.9615+0.892 * 1.0454+0.115 * 1.0031
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0229+4.679 * 0.1022-0.327 * 0.8058
=-2.03

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $2,542 Mil.
Revenue was 3572.9 + 3864.3 + 3622.2 + 3684.8 = $14,744 Mil.
Gross Profit was 3122.5 + 3384.6 + 3160 + 3243.3 = $12,910 Mil.
Total Current Assets was $13,701 Mil.
Total Assets was $126,837 Mil.
Property, Plant and Equipment(Net PPE) was $1,659 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,774 Mil.
Selling, General & Admin. Expense(SGA) was $4,829 Mil.
Total Current Liabilities was $10,392 Mil.
Long-Term Debt was $26,223 Mil.
Net Income was -2565.2 + -0.6 + 15220 + -501.7 = $12,153 Mil.
Non Operating Income was -1922.8 + 35 + 33.6 + 150.1 = $-1,704 Mil.
Cash Flow from Operations was 723.3 + -83.3 + -1092.4 + 1347.9 = $896 Mil.
Accounts Receivable was $2,653 Mil.
Revenue was 3399.3 + 3606.9 + 3469.5 + 3628.7 = $14,104 Mil.
Gross Profit was 2921.9 + 3005.1 + 2759.2 + 2710.9 = $11,397 Mil.
Total Current Assets was $10,092 Mil.
Total Assets was $136,074 Mil.
Property, Plant and Equipment(Net PPE) was $1,602 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,647 Mil.
Selling, General & Admin. Expense(SGA) was $4,516 Mil.
Total Current Liabilities was $10,196 Mil.
Long-Term Debt was $38,552 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)
=(2542 / 14744.2) / (2652.8 / 14104.4)
=0.17240678 / 0.18808315
=0.9167

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)
=(11397.1 / 14104.4) / (12910.4 / 14744.2)
=0.80805281 / 0.87562567
=0.9228

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 - (13700.7 + 1659.3) / 126836.9) / (1 - (10091.5 + 1602.4) / 136073.7)
=0.87889959 / 0.91406201
=0.9615

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
=14744.2 / 14104.4
=1.0454

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))
=(6646.9 / (6646.9 + 1602.4)) / (6774.4 / (6774.4 + 1659.3))
=0.80575322 / 0.80325361
=1.0031

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)
=(4829.2 / 14744.2) / (4516.4 / 14104.4)
=0.32753218 / 0.32021213
=1.0229

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)
=((26223 + 10391.6) / 126836.9) / ((38551.8 + 10195.5) / 136073.7)
=0.28867467 / 0.35824189
=0.8058

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
=(12152.5 - -1704.1 - 895.5) / 126836.9
=0.1022

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.

Allergan PLC has a M-score of -2.03 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 local exchange's currency.

Allergan PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.55051.12431.540.84891.6170.88492.39910.26331.12711.0844
GMI 0.94840.97540.9510.9740.9991.03291.15790.61020.79880.8656
AQI 0.9680.91531.37280.98320.891.22171.1781.17191.07630.9175
SGI 1.26141.01561.10161.27711.28531.29020.443.00721.69531.0982
DEPI 0.88561.30790.9620.70160.79111.37520.71430.43191.14110.9901
SGAI 1.09440.98981.11551.13810.77681.20311.61161.12510.95050.9528
LVGI 0.80260.91761.0480.86151.2511.59010.81460.73240.93820.8215
TATA -0.0836-0.0537-0.0276-0.0729-0.0553-0.043-0.0856-0.0726-0.00260.1033
M-score -3.06-2.59-1.94-2.75-2.03-2.61-2.02-1.84-1.79-1.87

Allergan PLC Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.26331.15051.30980.4011.12710.36430.3460.7831.08440.9167
GMI 0.61020.70920.66990.5910.79880.78420.8520.93110.86560.9228
AQI 1.17191.23971.45791.02491.07631.01461.02070.88060.91750.9615
SGI 3.00722.30032.15262.39721.69531.82371.62851.42931.09821.0454
DEPI 0.43190.83670.82540.74861.14110.67450.76340.95590.99011.0031
SGAI 1.12511.49651.69171.04830.95050.73650.7210.83290.95281.0229
LVGI 0.73240.70620.61130.9330.93820.99210.97920.79920.82150.8058
TATA -0.0726-0.031-0.040.0022-0.0026-0.0037-0.00680.07740.10330.1022
M-score -1.84-1.39-1.36-2.00-1.79-2.44-2.60-1.93-1.87-2.03
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