Stock Analysis on Net

Lowe’s Cos. Inc. (NYSE:LOW)

Financial Reporting Quality: Aggregate Accruals

Microsoft Excel

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

Lowe’s Cos. Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Feb 2, 2024 Feb 3, 2023 Jan 28, 2022 Jan 29, 2021 Jan 31, 2020 Feb 1, 2019
Operating Assets
Total assets 41,795 43,708 44,640 46,735 39,471 34,508
Less: Cash and cash equivalents 921 1,348 1,133 4,690 716 511
Less: Short-term investments 307 384 271 506 160 218
Operating assets 40,567 41,976 43,236 41,539 38,595 33,779
Operating Liabilities
Total liabilities 56,845 57,962 49,456 45,298 37,499 30,864
Less: Short-term borrowings 499 1,941 722
Less: Current maturities of long-term debt 537 585 868 1,112 597 1,110
Less: Long-term debt, excluding current maturities 35,384 32,876 23,859 20,668 16,768 14,391
Operating liabilities 20,924 24,002 24,729 23,518 18,193 14,641
 
Net operating assets1 19,643 17,974 18,507 18,021 20,402 19,138
Balance-sheet-based aggregate accruals2 1,669 (533) 486 (2,381) 1,264
Financial Ratio
Balance-sheet-based accruals ratio3 8.87% -2.92% 2.66% -12.39% 6.39%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Amazon.com Inc. 18.01% 32.91% 49.06% 18.08%
Home Depot Inc. -1.45% 15.25% 9.91% 21.77% 2.66%
TJX Cos. Inc. 30.23% 73.65% -109.84% 15.53% 3.29%
Balance-Sheet-Based Accruals Ratio, Sector
Consumer Discretionary Distribution & Retail 0.00% 16.15% 26.47% 31.88% 12.49%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Discretionary 0.00% 10.97% 11.48% 14.28% 5.02%

Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).

1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= 40,56720,924 = 19,643

2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= 19,64317,974 = 1,669

3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,669 ÷ [(19,643 + 17,974) ÷ 2] = 8.87%

4 Click competitor name to see calculations.

Financial ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, Lowe’s Cos. Inc. deteriorated earnings quality from 2023 to 2024.

Cash-Flow-Statement-Based Accruals Ratio

Lowe’s Cos. Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Feb 2, 2024 Feb 3, 2023 Jan 28, 2022 Jan 29, 2021 Jan 31, 2020 Feb 1, 2019
Net earnings 7,726 6,437 8,442 5,835 4,281 2,314
Less: Net cash provided by operating activities 8,140 8,589 10,113 11,049 4,296 6,193
Less: Net cash used in investing activities (1,901) (1,309) (1,646) (1,894) (1,369) (1,080)
Cash-flow-statement-based aggregate accruals 1,487 (843) (25) (3,320) 1,354 (2,799)
Financial Ratio
Cash-flow-statement-based accruals ratio1 7.91% -4.62% -0.14% -17.28% 6.85%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Amazon.com Inc. -2.63% -8.54% 48.44% 23.04%
Home Depot Inc. -3.12% 14.43% 8.24% 14.26% 0.66%
TJX Cos. Inc. 23.97% 55.57% -121.39% 14.48% -9.68%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Consumer Discretionary Distribution & Retail 0.00% 0.41% -4.02% 29.06% 14.86%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Discretionary 0.00% 4.38% 1.95% 10.92% 3.35%

Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).

1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,487 ÷ [(19,643 + 17,974) ÷ 2] = 7.91%

2 Click competitor name to see calculations.

Financial ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, Lowe’s Cos. Inc. deteriorated earnings quality from 2023 to 2024.