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GuruFocus has detected 7 Warning Signs with Humana Inc $HUM.
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Humana Inc (NYSE:HUM)
Beneish M-Score
-3.06 (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.

Humana Inc has a M-score of -3.06 suggests that the company is not a manipulator.

HUM' s Beneish M-Score Range Over the Past 10 Years
Min: -5.14   Max: 0.09
Current: -3.06

-5.14
0.09

During the past 13 years, the highest Beneish M-Score of Humana Inc was 0.09. The lowest was -5.14. And the median was -2.53.


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 Humana 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 * 1.0565+0.528 * 1+0.404 * 1.0049+0.892 * 1.0016+0.115 * 1.0213
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9921+4.679 * -0.1313-0.327 * 1.0703
=-3.06

* 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 $1,838 Mil.
Revenue was 13762 + 12878 + 13694 + 14007 = $54,341 Mil.
Gross Profit was 13762 + 12878 + 13694 + 14007 = $54,341 Mil.
Total Current Assets was $0 Mil.
Total Assets was $31,712 Mil.
Property, Plant and Equipment(Net PPE) was $1,525 Mil.
Depreciation, Depletion and Amortization(DDA) was $468 Mil.
Selling, General & Admin. Expense(SGA) was $7,062 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt was $4,780 Mil.
Net Income was 1115 + -401 + 450 + 311 = $1,475 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 4205 + -2773 + 4503 + -296 = $5,639 Mil.
Accounts Receivable was $1,737 Mil.
Revenue was 13800 + 13361 + 13363 + 13732 = $54,256 Mil.
Gross Profit was 13800 + 13361 + 13363 + 13732 = $54,256 Mil.
Total Current Assets was $0 Mil.
Total Assets was $26,934 Mil.
Property, Plant and Equipment(Net PPE) was $1,420 Mil.
Depreciation, Depletion and Amortization(DDA) was $448 Mil.
Selling, General & Admin. Expense(SGA) was $7,107 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt was $3,793 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)
=(1838 / 54341) / (1737 / 54256)
=0.03382345 / 0.03201489
=1.0565

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)
=(54256 / 54256) / (54341 / 54341)
=1 / 1
=1

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 - (0 + 1525) / 31712) / (1 - (0 + 1420) / 26934)
=0.95191095 / 0.94727853
=1.0049

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
=54341 / 54256
=1.0016

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))
=(448 / (448 + 1420)) / (468 / (468 + 1525))
=0.23982869 / 0.23482188
=1.0213

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)
=(7062 / 54341) / (7107 / 54256)
=0.12995712 / 0.13099012
=0.9921

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)
=((4780 + 0) / 31712) / ((3793 + 0) / 26934)
=0.15073158 / 0.14082572
=1.0703

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
=(1475 - 0 - 5639) / 31712
=-0.1313

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.

Humana Inc has a M-score of -3.06 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.

Humana Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.76811.13940.97511.0730.98350.66731.22740.94420.9851.1007
GMI 1111111111
AQI 1.00470.99471.0070.99720.99910.99640.9961.0070.99590.9966
SGI 1.18091.14461.06961.08511.09631.06231.05591.1741.11941.0017
DEPI 0.9530.95070.87811.10370.97831.05950.90840.96781.09671.0343
SGAI 0.97430.99131.0020.95481.12351.01731.03231.02390.85580.9881
LVGI 1.04281.13330.79830.87410.90391.39490.95951.29660.94560.9712
TATA -0.0289-0.0257-0.027-0.0694-0.0373-0.0351-0.0234-0.020.0165-0.0521
M-score -2.68-2.39-2.51-2.60-2.58-3.02-2.33-2.57-2.26-2.62

Humana Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.94420.97270.87510.85490.9850.9591.14640.75311.10071.0565
GMI 1111111111
AQI 1.0071.00641.00481.00020.99590.99620.99771.00540.99661.0049
SGI 1.1741.191.17311.14881.11941.07181.0461.03021.00171.0016
DEPI 0.96780.96720.95540.96391.09671.10931.11241.07311.03431.0213
SGAI 1.02390.97910.93850.88750.85580.85020.8620.90870.98810.9921
LVGI 1.29661.29621.34191.00040.94560.94370.92470.81810.97121.0703
TATA -0.020.0060.02560.02450.0165-0.0061-0.0218-0.1334-0.0521-0.1313
M-score -2.57-2.40-2.43-2.35-2.26-2.43-2.35-3.22-2.62-3.06
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