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GuruFocus has detected 5 Warning Signs with Teva Pharmaceutical Industries Ltd $TEVA.
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Teva Pharmaceutical Industries Ltd (NYSE:TEVA)
Beneish M-Score
-2.25 (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.

Teva Pharmaceutical Industries Ltd has a M-score of -2.25 suggests that the company is not a manipulator.

TEVA' s Beneish M-Score Range Over the Past 10 Years
Min: -3.11   Max: -1.61
Current: -2.25

-3.11
-1.61

During the past 13 years, the highest Beneish M-Score of Teva Pharmaceutical Industries Ltd was -1.61. The lowest was -3.11. And the median was -2.51.


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 Teva Pharmaceutical Industries Ltd 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 * 1.2003+0.528 * 1.11+0.404 * 1.3091+0.892 * 1.1665+0.115 * 0.9375
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9641+4.679 * -0.035-0.327 * 1.3636
=-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 $7,264 Mil.
Revenue was 5630 + 6492 + 5563 + 5038 = $22,723 Mil.
Gross Profit was 2819 + 3390 + 2801 + 2877 = $11,887 Mil.
Total Current Assets was $14,835 Mil.
Total Assets was $91,276 Mil.
Property, Plant and Equipment(Net PPE) was $8,160 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,699 Mil.
Selling, General & Admin. Expense(SGA) was $5,180 Mil.
Total Current Liabilities was $15,903 Mil.
Long-Term Debt was $32,694 Mil.
Net Income was 645 + -973 + 412 + 254 = $338 Mil.
Non Operating Income was 0 + -784 + 0 + 0 = $-784 Mil.
Cash Flow from Operations was 470 + 1425 + 1461 + 963 = $4,319 Mil.
Accounts Receivable was $5,188 Mil.
Revenue was 4810 + 4881 + 4823 + 4966 = $19,480 Mil.
Gross Profit was 2791 + 2847 + 2771 + 2902 = $11,311 Mil.
Total Current Assets was $16,994 Mil.
Total Assets was $55,126 Mil.
Property, Plant and Equipment(Net PPE) was $6,632 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,278 Mil.
Selling, General & Admin. Expense(SGA) was $4,606 Mil.
Total Current Liabilities was $12,905 Mil.
Long-Term Debt was $8,619 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)
=(7264 / 22723) / (5188 / 19480)
=0.3196761 / 0.26632444
=1.2003

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)
=(11311 / 19480) / (11887 / 22723)
=0.58064682 / 0.52312635
=1.11

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 - (14835 + 8160) / 91276) / (1 - (16994 + 6632) / 55126)
=0.74807178 / 0.57141821
=1.3091

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
=22723 / 19480
=1.1665

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))
=(1278 / (1278 + 6632)) / (1699 / (1699 + 8160))
=0.16156764 / 0.17232985
=0.9375

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)
=(5180 / 22723) / (4606 / 19480)
=0.22796286 / 0.23644764
=0.9641

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)
=((32694 + 15903) / 91276) / ((8619 + 12905) / 55126)
=0.53241816 / 0.39045097
=1.3636

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
=(338 - -784 - 4319) / 91276
=-0.035

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.

Teva Pharmaceutical Industries Ltd 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.

Teva Pharmaceutical Industries Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.08461.11370.86030.94070.99880.80830.95811.01521.02051.2617
GMI 0.97710.96291.01570.94261.08220.99110.99470.96640.94381.0673
AQI 0.90731.14610.96981.0881.04030.93071.03530.96070.98361.3525
SGI 1.11891.17831.25391.15991.13591.10950.99990.99790.96941.1145
DEPI 0.95711.45920.60541.06061.20210.71571.07311.05811.12551.049
SGAI 1.08071.12111.11130.94451.01291.04581.33750.74360.95820.9693
LVGI 0.88061.14410.83491.01721.3181.01930.96790.95490.87681.395
TATA -0.0008-0.0789-0.0413-0.0205-0.028-0.0509-0.0246-0.0444-0.0594-0.0443
M-score -2.33-2.56-2.59-2.47-2.51-2.88-2.66-2.64-2.74-2.28

Teva Pharmaceutical Industries Ltd Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.01521.05251.05171.00411.02050.97930.99591.50341.26171.2003
GMI 0.96640.95830.93480.94230.94380.9520.9821.02511.06731.11
AQI 0.96070.92831.07381.08940.98361.07780.93321.20991.35251.3091
SGI 0.99790.99210.98240.9710.96940.96180.96921.01771.11451.1665
DEPI 1.05811.07861.10221.12131.12551.14361.11731.12131.0490.9375
SGAI 0.74360.74130.75150.74070.95820.95370.96990.9830.96460.9641
LVGI 0.95491.00851.06021.05240.87680.83870.81441.14851.3951.3636
TATA -0.0887-0.1038-0.1124-0.1519-0.0594-0.0554-0.0488-0.0292-0.0443-0.035
M-score -2.85-2.92-2.94-3.17-2.74-2.71-2.70-2.07-2.28-2.25
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