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GuruFocus has detected 2 Warning Signs with Amgen Inc $AMGN.
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Amgen Inc (NAS:AMGN)
Beneish M-Score
-2.63 (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.

Amgen Inc has a M-score of -2.63 suggests that the company is not a manipulator.

AMGN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.21   Max: 0.36
Current: -2.63

-3.21
0.36

During the past 13 years, the highest Beneish M-Score of Amgen Inc was 0.36. The lowest was -3.21. And the median was -2.64.


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 Amgen 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 * 1.0197+0.528 * 0.9884+0.404 * 0.9104+0.892 * 1.0348+0.115 * 1.0097
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9471+4.679 * -0.0376-0.327 * 0.9703
=-2.63

* 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 $3,248 Mil.
Revenue was 5464 + 5965 + 5811 + 5688 = $22,928 Mil.
Gross Profit was 4468 + 4898 + 4784 + 4638 = $18,788 Mil.
Total Current Assets was $46,456 Mil.
Total Assets was $77,862 Mil.
Property, Plant and Equipment(Net PPE) was $4,960 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,108 Mil.
Selling, General & Admin. Expense(SGA) was $4,923 Mil.
Total Current Liabilities was $10,523 Mil.
Long-Term Debt was $30,293 Mil.
Net Income was 2071 + 1935 + 2017 + 1870 = $7,893 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 2385 + 3100 + 2662 + 2677 = $10,824 Mil.
Accounts Receivable was $3,078 Mil.
Revenue was 5527 + 5536 + 5723 + 5370 = $22,156 Mil.
Gross Profit was 4509 + 4465 + 4689 + 4281 = $17,944 Mil.
Total Current Assets was $42,206 Mil.
Total Assets was $75,116 Mil.
Property, Plant and Equipment(Net PPE) was $4,885 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,105 Mil.
Selling, General & Admin. Expense(SGA) was $5,023 Mil.
Total Current Liabilities was $8,523 Mil.
Long-Term Debt was $32,060 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)
=(3248 / 22928) / (3078 / 22156)
=0.14166085 / 0.13892399
=1.0197

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)
=(17944 / 22156) / (18788 / 22928)
=0.80989348 / 0.81943475
=0.9884

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 - (46456 + 4960) / 77862) / (1 - (42206 + 4885) / 75116)
=0.33965221 / 0.37308962
=0.9104

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
=22928 / 22156
=1.0348

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))
=(2105 / (2105 + 4885)) / (2108 / (2108 + 4960))
=0.30114449 / 0.29824561
=1.0097

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)
=(4923 / 22928) / (5023 / 22156)
=0.21471563 / 0.2267106
=0.9471

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)
=((30293 + 10523) / 77862) / ((32060 + 8523) / 75116)
=0.5242095 / 0.54027105
=0.9703

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
=(7893 - 0 - 10824) / 77862
=-0.0376

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.

Amgen Inc has a M-score of -2.63 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.

Amgen Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.95550.97141.04241.07691.19820.78470.99020.87881.08950.9957
GMI 1.0310.9770.98811.00551.03181.01410.99251.05290.96860.9828
AQI 0.94540.93140.89660.90380.95121.00821.54440.83380.93110.8754
SGI 1.03531.01570.97591.02811.03511.1081.08171.07431.07971.0614
DEPI 0.83131.09030.99860.99380.95080.96430.87520.67770.95171.0087
SGAI 0.96451.10991.0331.01421.09120.96570.99550.84380.95520.9842
LVGI 1.05810.87040.94651.09831.38231.07030.95730.94940.9821.0068
TATA -0.0645-0.0531-0.0437-0.0267-0.0294-0.0283-0.0183-0.055-0.0391-0.0339
M-score -2.83-2.75-2.70-2.58-2.55-2.72-2.29-2.82-2.55-2.65

Amgen Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.87880.93390.96561.13341.08951.12181.02341.04450.99571.0197
GMI 1.05291.02211.00720.98250.96860.97280.96940.97840.98280.9884
AQI 0.83380.83850.93030.93720.93110.89430.91750.89850.87540.9104
SGI 1.07431.08521.06711.08681.07971.07681.08231.05151.06141.0348
DEPI 0.67770.76260.83580.93540.95170.96480.97780.99031.00871.0097
SGAI 0.84380.85810.89860.89450.95520.9921.00781.03060.98420.9471
LVGI 0.94940.93190.94870.95060.9821.02970.97281.00241.00680.9703
TATA -0.055-0.052-0.0637-0.0566-0.0391-0.0392-0.0281-0.0223-0.0339-0.0376
M-score -2.82-2.74-2.76-2.55-2.55-2.55-2.56-2.56-2.65-2.63
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