Constellation Brands Inc. (NYSE:STZ)

Net operating assets

The net operating assets show a general increasing trend from 18,159,100 thousand US$ in 2018 to a peak of 26,360,100 thousand US$ in 2019, followed by a gradual decline over the next three years, decreasing to 22,264,900 thousand US$ in 2022. This indicates an expansion in operating assets until 2019, with a subsequent contraction from 2020 onward.

Balance-sheet-based aggregate accruals

The aggregate accruals exhibit significant volatility over the examined periods. Starting at 2,213,600 thousand US$ in 2018, they rose sharply to 8,201,000 thousand US$ in 2019. However, in 2020, they reversed to a negative value of -1,782,600 thousand US$, continuing negative at -666,700 thousand US$ in 2021 and further to -1,645,900 thousand US$ in 2022. This shift from positive to negative accruals may reflect changes in accounting estimates, operational cash flow timing differences, or management discretion affecting earnings quality.

Balance-sheet-based accruals ratio

The accruals ratio follows a similar pattern, beginning with a moderate positive ratio of 12.98% in 2018 and increasing substantially to 36.84% in 2019. From 2020 onwards, the ratio turns negative and remains so, with values of -7.00% in 2020, -2.75% in 2021, and -7.13% in 2022. The high positive ratio in 2019 suggests increased accrual-based earnings components, while the negative ratios in later years indicate a shift towards more cash-based earnings or possible reductions in accrual components.

The analysis of the annual financial reporting quality measure data reveals several noteworthy trends over the five-year period from 2018 to 2022.

Net Operating Assets

The net operating assets increased significantly from approximately 18.16 billion US dollars in 2018 to 26.36 billion US dollars in 2019. Following this peak, there was a steady decline over the next three years, falling to about 22.26 billion US dollars by 2022. This pattern suggests a rapid expansion in net operating assets in the early period, succeeded by a more conservative or divestiture trend subsequently.

Cash-Flow-Statement-Based Aggregate Accruals

The aggregate accruals exhibit considerable volatility during the analyzed timeframe. In 2018, accruals stood at approximately 1.81 billion US dollars, rising sharply to around 6.02 billion in 2019. This was followed by a sharp reversal into negative territory in 2020 with -2.03 billion US dollars, and further smaller negative values in 2021 and 2022. The abrupt shift from positive to negative accruals may indicate changes in working capital management, accounting policies, or operating performance.

Cash-Flow-Statement-Based Accruals Ratio

The accruals ratio also reflects the substantial fluctuations in accruals, starting at 10.62% in 2018 and more than doubling to 27.05% in 2019, which is relatively high and may warrant scrutiny regarding earnings quality for that year. From 2020 through 2022, the ratio remained negative, declining to -7.98%, -2.97%, and -7.41% respectively. Negative accrual ratios typically signify that cash flows exceed earnings, which might indicate higher earnings quality or changes in accrual accounting components.

Overall, the data indicates a period of aggressive growth in net operating assets and accruals up to 2019, followed by a reversal in subsequent years characterized by reductions in assets and negative accruals. The fluctuation in accruals and their ratio suggests potential variations in financial reporting quality or operational adjustments that should be further investigated for comprehensive understanding.