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GuruFocus has detected 5 Warning Signs with Alere Inc $ALR.
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Alere Inc (NYSE:ALR)
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.

Alere Inc has a M-score of -3.07 suggests that the company is not a manipulator.

ALR' s Beneish M-Score Range Over the Past 10 Years
Min: -3.52   Max: 3.09
Current: -3.07

-3.52
3.09

During the past 13 years, the highest Beneish M-Score of Alere Inc was 3.09. The lowest was -3.52. And the median was -2.48.


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 Alere 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 * 0.8594+0.528 * 0.9634+0.404 * 0.9747+0.892 * 0.9822+0.115 * 1.0639
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2535+4.679 * -0.0775-0.327 * 1.0574
=-3.07

* 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 $388 Mil.
Revenue was 588.216 + 604.684 + 582.354 + 611.088 = $2,386 Mil.
Gross Profit was 281.726 + 275.621 + 266.128 + 281.861 = $1,105 Mil.
Total Current Assets was $1,483 Mil.
Total Assets was $5,674 Mil.
Property, Plant and Equipment(Net PPE) was $440 Mil.
Depreciation, Depletion and Amortization(DDA) was $274 Mil.
Selling, General & Admin. Expense(SGA) was $1,013 Mil.
Total Current Liabilities was $713 Mil.
Long-Term Debt was $2,859 Mil.
Net Income was -64.312 + -114.325 + 21.82 + -35.034 = $-192 Mil.
Non Operating Income was -3.499 + 36.888 + -15.088 + -14.112 = $4 Mil.
Cash Flow from Operations was 61.076 + 32.328 + 52.84 + 97.311 = $244 Mil.
Accounts Receivable was $459 Mil.
Revenue was 586.94 + 615.584 + 603.768 + 623.371 = $2,430 Mil.
Gross Profit was 271.125 + 248.785 + 276.966 + 287.334 = $1,084 Mil.
Total Current Assets was $1,451 Mil.
Total Assets was $5,895 Mil.
Property, Plant and Equipment(Net PPE) was $445 Mil.
Depreciation, Depletion and Amortization(DDA) was $307 Mil.
Selling, General & Admin. Expense(SGA) was $822 Mil.
Total Current Liabilities was $679 Mil.
Long-Term Debt was $2,831 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)
=(387.687 / 2386.342) / (459.292 / 2429.663)
=0.16246079 / 0.18903527
=0.8594

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)
=(1084.21 / 2429.663) / (1105.336 / 2386.342)
=0.44623884 / 0.46319262
=0.9634

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 - (1483.143 + 439.802) / 5673.869) / (1 - (1451.492 + 445.218) / 5895.308)
=0.66108752 / 0.67826787
=0.9747

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
=2386.342 / 2429.663
=0.9822

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))
=(307.354 / (307.354 + 445.218)) / (274.038 / (274.038 + 439.802))
=0.40840478 / 0.38389275
=1.0639

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)
=(1012.526 / 2386.342) / (822.421 / 2429.663)
=0.42430046 / 0.3384918
=1.2535

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)
=((2859 + 713.284) / 5673.869) / ((2831.308 + 678.887) / 5895.308)
=0.62960283 / 0.59542182
=1.0574

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
=(-191.851 - 4.189 - 243.555) / 5673.869
=-0.0775

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.

Alere Inc has a M-score of -3.07 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.

Alere Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.10390.84871.11630.99951.0821.09830.78981.03460.99440.9745
GMI 0.85830.86960.98361.04161.00841.00321.04381.05861.04330.9833
AQI 1.11851.0850.94750.97250.97710.99020.94260.96391.04040.9676
SGI 1.47431.8851.21491.1211.10731.00331.17690.91450.95290.9713
DEPI 1.20180.54731.00251.01381.0911.06110.93851.04751.03851.042
SGAI 1.32541.10930.97111.05660.92110.93381.03980.95510.87821.2321
LVGI 1.08590.92951.17981.35131.17121.03741.05861.02310.91531.0421
TATA -0.0699-0.0282-0.0364-0.2075-0.1039-0.058-0.0428-0.0389-0.0012-0.0563
M-score -2.38-2.04-2.44-3.46-2.83-2.65-2.75-2.68-2.44-2.86

Alere Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.03460.94040.89541.00890.99441.02790.94990.98360.97450.8594
GMI 1.05861.06921.04651.03451.04331.04711.04691.04510.98330.9634
AQI 0.96390.98150.90670.95891.04040.97841.05491.03170.96760.9747
SGI 0.91450.94850.98190.96490.95290.94740.95150.96020.97130.9822
DEPI 1.04750.93150.91351.02441.03851.03421.00821.061.0421.0639
SGAI 0.95510.93460.8350.84950.87820.93211.11391.16061.23211.2535
LVGI 1.02310.9490.97850.95480.91530.99130.97690.98641.04211.0574
TATA -0.03890.00680.01720.0287-0.0012-0.0325-0.0544-0.0385-0.0563-0.0775
M-score -2.68-2.50-2.50-2.32-2.44-2.62-2.79-2.69-2.86-3.07
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