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GuruFocus has detected 1 Warning Sign with Novo Nordisk A/S $NVO.
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Novo Nordisk A/S (NYSE:NVO)
Beneish M-Score
-3.27 (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.

Novo Nordisk A/S has a M-score of -3.33 suggests that the company is not a manipulator.

NVO' s Beneish M-Score Range Over the Past 10 Years
Min: -3.35   Max: -0.58
Current: -3.27

-3.35
-0.58

During the past 13 years, the highest Beneish M-Score of Novo Nordisk A/S was -0.58. The lowest was -3.35. And the median was -2.72.


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 Novo Nordisk A/S 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 * 0.9809+0.528 * 1.0018+0.404 * 0.645+0.892 * 1.0122+0.115 * 1.0439
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.96+4.679 * -0.1502-0.327 * 1.0409
=-3.33

* 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 $2,446 Mil.
Revenue was 4090.69342803 + 4193.18246271 + 4147.76321735 + 4147.25872225 = $16,579 Mil.
Gross Profit was 3479.50483804 + 3495.8312064 + 3547.37159211 + 3536.32381815 = $14,059 Mil.
Total Current Assets was $8,001 Mil.
Total Assets was $13,545 Mil.
Property, Plant and Equipment(Net PPE) was $4,471 Mil.
Depreciation, Depletion and Amortization(DDA) was $479 Mil.
Selling, General & Admin. Expense(SGA) was $4,749 Mil.
Total Current Liabilities was $7,031 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1460.18144437 + 1233.48080086 + 1476.57779786 + 1505.51276242 = $5,676 Mil.
Non Operating Income was 0 + -88.0551301685 + 0 + 0 = $-88 Mil.
Cash Flow from Operations was 1739.39298089 + 1581.44745051 + 2287.8445549 + 2189.54840659 = $7,798 Mil.
Accounts Receivable was $2,463 Mil.
Revenue was 4062.34138477 + 4213.62906756 + 4032.08572246 + 4071.47156184 = $16,380 Mil.
Gross Profit was 3430.26901144 + 3541.22282212 + 3453.12805695 + 3490.8215468 = $13,915 Mil.
Total Current Assets was $6,924 Mil.
Total Assets was $12,296 Mil.
Property, Plant and Equipment(Net PPE) was $3,861 Mil.
Depreciation, Depletion and Amortization(DDA) was $434 Mil.
Selling, General & Admin. Expense(SGA) was $4,887 Mil.
Total Current Liabilities was $6,132 Mil.
Long-Term Debt was $0 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)
=(2445.90456199 / 16578.8978303) / (2463.49983579 / 16379.5277366)
=0.14753119 / 0.15040115
=0.9809

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)
=(13915.4414373 / 16379.5277366) / (14059.0314547 / 16578.8978303)
=0.84956304 / 0.84800761
=1.0018

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 - (8000.8051414 + 4470.83519043) / 13545.497678) / (1 - (6923.98411608 + 3860.95602066) / 12296.3007196)
=0.07927781 / 0.12291181
=0.645

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
=16578.8978303 / 16379.5277366
=1.0122

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))
=(434.030261509 / (434.030261509 + 3860.95602066)) / (479.188747525 / (479.188747525 + 4470.83519043))
=0.1010551 / 0.09680534
=1.0439

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)
=(4749.04573254 / 16578.8978303) / (4887.22536264 / 16379.5277366)
=0.28645123 / 0.29837401
=0.96

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)
=((0 + 7031.04107659) / 13545.497678) / ((0 + 6131.729018) / 12296.3007196)
=0.51906849 / 0.49866453
=1.0409

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
=(5675.75280551 - -88.0551301685 - 7798.23339289) / 13545.497678
=-0.1502

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.

Novo Nordisk A/S has a M-score of -3.33 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.

Novo Nordisk A/S Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.07980.98971.02851.02381.2253
GMI 0.97730.98480.99420.98321.0043
AQI 0.90921.12681.08911.22230.6431
SGI 1.07291.10161.04831.02141.0362
DEPI 01.071401.29311.0593
SGAI 1.00670.97650.93450.99060.9697
LVGI 0.9541.17631.26931.01851.0923
TATA -0.0807-0.105-0.06280.0246-0.1055
M-score -2.87-2.89-2.86-2.21-2.89

Novo Nordisk A/S Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.02851.07221.00051.07111.02381.0991.05871.14431.22530.9809
GMI 0.99420.99220.98370.98580.98320.98850.99811.00151.00431.0018
AQI 1.08911.2591.111.08551.22230.90390.75860.7560.64310.645
SGI 1.04831.02031.01811.01811.02141.05521.05131.04671.03621.0122
DEPI 00.20110.42250.93991.29311.43321.37251.11821.05931.0439
SGAI 0.93450.94630.96320.960.99061.00060.98350.98360.96970.96
LVGI 1.26931.29871.27271.07331.01850.91990.99131.05321.09231.0409
TATA -0.0628-0.0363-0.0611-0.02490.0246-0.0172-0.0262-0.0458-0.1055-0.1502
M-score -2.86-2.65-2.86-2.51-2.21-2.39-2.55-2.62-2.89-3.33
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