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GuruFocus has detected 4 Warning Signs with Merus Labs International Inc $MSLI.
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Merus Labs International Inc (NAS:MSLI)
Beneish M-Score
-2.24 (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.

Merus Labs International Inc has a M-score of -2.25 suggests that the company is not a manipulator.

MSLI' s Beneish M-Score Range Over the Past 10 Years
Min: -6.02   Max: 348.84
Current: -2.24

-6.02
348.84

During the past 13 years, the highest Beneish M-Score of Merus Labs International Inc was 348.84. The lowest was -6.02. And the median was -2.00.


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 Merus Labs International 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 * 0.9148+0.528 * 1.1474+0.404 * 0.9576+0.892 * 1.7056+0.115 * 1.0045
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2264+4.679 * -0.0757-0.327 * 0.9563
=-2.25

* 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 $21.30 Mil.
Revenue was 16.9179054306 + 19.5434440363 + 22.7265791883 + 19.8984023577 = $79.09 Mil.
Gross Profit was 10.6237394487 + 13.4560311867 + 14.4675007629 + 13.0572359237 = $51.60 Mil.
Total Current Assets was $34.98 Mil.
Total Assets was $261.13 Mil.
Property, Plant and Equipment(Net PPE) was $0.23 Mil.
Depreciation, Depletion and Amortization(DDA) was $28.32 Mil.
Selling, General & Admin. Expense(SGA) was $20.70 Mil.
Total Current Liabilities was $43.53 Mil.
Long-Term Debt was $70.01 Mil.
Net Income was -0.876223201614 + -4.73573731164 + -0.0503509307293 + -3.91887699705 = $-9.58 Mil.
Non Operating Income was -0.214387091955 + -0.305870005248 + -1.71116875191 + -0.515743756786 = $-2.75 Mil.
Cash Flow from Operations was 2.0826174647 + 3.68918209761 + 5.96505950565 + 1.20598728091 = $12.94 Mil.
Accounts Receivable was $13.65 Mil.
Revenue was 14.897928323 + 11.6137971268 + 12.1694557515 + 7.68701981399 = $46.37 Mil.
Gross Profit was 10.3024345985 + 8.24327280683 + 9.13990652797 + 7.0303275374 = $34.72 Mil.
Total Current Assets was $28.29 Mil.
Total Assets was $294.04 Mil.
Property, Plant and Equipment(Net PPE) was $0.08 Mil.
Depreciation, Depletion and Amortization(DDA) was $22.81 Mil.
Selling, General & Admin. Expense(SGA) was $9.89 Mil.
Total Current Liabilities was $35.77 Mil.
Long-Term Debt was $97.92 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)
=(21.2990214387 / 79.0863310129) / (13.6511416906 / 46.3682010154)
=0.26931356 / 0.2944074
=0.9148

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)
=(34.7159414707 / 46.3682010154) / (51.604507322 / 79.0863310129)
=0.7487015 / 0.65250855
=1.1474

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 - (34.9787106895 + 0.230073952342) / 261.131694928) / (1 - (28.2882201724 + 0.0831695145925) / 294.042794496)
=0.86516848 / 0.90351272
=0.9576

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
=79.0863310129 / 46.3682010154
=1.7056

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))
=(22.8103913339 / (22.8103913339 + 0.0831695145925)) / (28.318894039 / (28.318894039 + 0.230073952342))
=0.99636712 / 0.99194108
=1.0045

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)
=(20.6953438714 / 79.0863310129) / (9.89381756388 / 46.3682010154)
=0.26168041 / 0.21337506
=1.2264

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)
=((70.012698887 + 43.5317845671) / 261.131694928) / ((97.9230303947 + 35.7712082262) / 294.042794496)
=0.43481694 / 0.45467613
=0.9563

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
=(-9.58118844104 - -2.7471696059 - 12.9428463489) / 261.131694928
=-0.0757

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.

Merus Labs International Inc has a M-score of -2.25 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.

Merus Labs International Inc Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 0.24011.74570.89980.004929.27797.43210.4630.61521.83761.1471
GMI 111111.10210.99251.10380.9761.2735
AQI 1.60010.86180.3480.40381.57687.04440.94121.10290.85671.1523
SGI 5.15420.6494-0.03390.618010.7362.99760.86381.62971.7672
DEPI 0.85110.8131.60120.70320.56580.62390.99811.00890.99471.0043
SGAI 0.3511.61381.35590.69831.6480.24150.47621.37290.63290.9487
LVGI 1.44831.06790.70071.35910.45117.8860.8050.84940.65921.6124
TATA 0.0619-0.4274-0.68780.0717-0.4701-0.239-0.1526-0.0713-0.061-0.075
M-score 1.01-4.31-6.87-3.7420.7011.34-1.78-3.21-1.33-2.00

Merus Labs International Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.21131.53841.98511.83760.93861.38291.70671.14711.43320.9148
GMI 1.05260.99880.93460.9761.05051.15061.27191.27351.2061.1474
AQI 1.07961.31281.62370.85670.86331.0681.1381.15231.13250.9576
SGI 1.00041.11941.18441.62971.51861.47831.8071.76721.85621.7056
DEPI 1.00671.00491.00450.99470.99660.99791.01031.00431.00371.0045
SGAI 1.0070.78260.73960.63290.79290.83910.78310.94871.02991.2264
LVGI 0.8721.13251.0580.65920.61821.11591.53931.61241.76950.9563
TATA -0.0494-0.0629-0.0611-0.061-0.0924-0.0661-0.0634-0.075-0.0891-0.0757
M-score -2.42-2.05-1.45-1.33-2.37-1.91-1.35-2.00-1.83-2.25
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