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GuruFocus has detected 4 Warning Signs with Horizon Pharma PLC $HZNP.
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Horizon Pharma PLC (NAS:HZNP)
Beneish M-Score
-2.71 (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.

Horizon Pharma PLC has a M-score of -2.71 suggests that the company is not a manipulator.

HZNP' s Beneish M-Score Range Over the Past 10 Years
Min: -17.05   Max: 8.77
Current: -2.71

-17.05
8.77

During the past 9 years, the highest Beneish M-Score of Horizon Pharma PLC was 8.77. The lowest was -17.05. And the median was -0.20.


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 Horizon Pharma 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 * 1.1631+0.528 * 1.2589+0.404 * 1.0003+0.892 * 1.1752+0.115 * 0.9893
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0708+4.679 * -0.1264-0.327 * 1.2058
=-2.71

* 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 $396.8 Mil.
Revenue was 220.859 + 310.35 + 208.702 + 257.378 = $997.3 Mil.
Gross Profit was 81.743 + 160.598 + 123.541 + 176.252 = $542.1 Mil.
Total Current Assets was $1,197.1 Mil.
Total Assets was $4,374.8 Mil.
Property, Plant and Equipment(Net PPE) was $23.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $242.7 Mil.
Selling, General & Admin. Expense(SGA) was $640.4 Mil.
Total Current Liabilities was $718.0 Mil.
Long-Term Debt was $1,880.8 Mil.
Net Income was -90.57 + -130.542 + -5.87 + 14.984 = $-212.0 Mil.
Non Operating Income was -0.757 + -0.881 + 6.771 + -0.011 = $5.1 Mil.
Cash Flow from Operations was 20.721 + 139.185 + 128.787 + 47.303 = $336.0 Mil.
Accounts Receivable was $290.3 Mil.
Revenue was 204.69 + 244.538 + 226.544 + 172.821 = $848.6 Mil.
Gross Profit was 127.457 + 176.965 + 165.294 + 110.995 = $580.7 Mil.
Total Current Assets was $876.6 Mil.
Total Assets was $3,205.5 Mil.
Property, Plant and Equipment(Net PPE) was $18.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $170.7 Mil.
Selling, General & Admin. Expense(SGA) was $508.9 Mil.
Total Current Liabilities was $442.9 Mil.
Long-Term Debt was $1,136.2 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)
=(396.785 / 997.289) / (290.289 / 848.593)
=0.39786361 / 0.34208272
=1.1631

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)
=(580.711 / 848.593) / (542.134 / 997.289)
=0.68432217 / 0.54360772
=1.2589

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 - (1197.062 + 23.557) / 4374.756) / (1 - (876.604 + 18.581) / 3205.494)
=0.72098581 / 0.72073415
=1.0003

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
=997.289 / 848.593
=1.1752

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))
=(170.65 / (170.65 + 18.581)) / (242.678 / (242.678 + 23.557))
=0.90180784 / 0.91151802
=0.9893

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)
=(640.434 / 997.289) / (508.901 / 848.593)
=0.64217494 / 0.59969974
=1.0708

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)
=((1880.762 + 717.97) / 4374.756) / ((1136.18 + 442.924) / 3205.494)
=0.59402902 / 0.49262423
=1.2058

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
=(-211.998 - 5.122 - 335.996) / 4374.756
=-0.1264

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.

Horizon Pharma PLC has a M-score of -2.71 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.

Horizon Pharma PLC Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.4150.53671.17321.15451.11681.121
GMI 16.1245-0.13310.46091.0921.03481.1851
AQI 0.76490.5251.44551.28470.90261.1846
SGI 2.91542.72043.92784.0122.54941.296
DEPI 1.03750.94350.84060.86270.9081.0041
SGAI 0.50080.71820.340.56590.82551.066
LVGI 1.78360.96581.60320.75891.05261.1503
TATA -0.6995-0.0444-0.0009-0.0483-0.0119-0.1263
M-score 4.06-2.320.080.42-1.06-2.58

Horizon Pharma PLC Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.15451.03891.30761.00051.11680.96270.82931.10531.1211.1631
GMI 1.0921.16871.08111.09931.03481.05341.01891.06111.18511.2589
AQI 1.28471.15681.79261.0050.90261.40671.01610.9771.18461.0003
SGI 4.0123.05482.70022.76152.54942.36922.00711.48511.2961.1752
DEPI 0.86270.91140.90760.89650.9080.93260.98530.96661.00410.9893
SGAI 0.56590.71720.92150.73860.82550.88510.75860.96861.0661.0708
LVGI 0.75890.82020.77740.95451.05260.98560.9981.04311.15031.2058
TATA -0.04830.00690.0360.0122-0.0119-0.0622-0.0924-0.1059-0.1263-0.1264
M-score 0.42-0.33-0.07-0.75-1.06-1.37-2.11-2.44-2.58-2.71
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