Stock Analysis on Net

Home Depot Inc. (NYSE:HD)

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

Home Depot Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Jan 28, 2024 Jan 29, 2023 Jan 30, 2022 Jan 31, 2021 Feb 2, 2020 Feb 3, 2019
Operating Assets
Total assets 76,530 76,445 71,876 70,581 51,236 44,003
Less: Cash and cash equivalents 3,760 2,757 2,343 7,895 2,133 1,778
Operating assets 72,770 73,688 69,533 62,686 49,103 42,225
Operating Liabilities
Total liabilities 75,486 74,883 73,572 67,282 54,352 45,881
Less: Short-term debt 1,035 974 1,339
Less: Current installments of long-term debt 1,368 1,231 2,447 1,416 1,839 1,056
Less: Long-term debt, excluding current installments 42,743 41,962 36,604 35,822 28,670 26,807
Operating liabilities 31,375 31,690 33,486 30,044 22,869 16,679
 
Net operating assets1 41,395 41,998 36,047 32,642 26,234 25,546
Balance-sheet-based aggregate accruals2 (603) 5,951 3,405 6,408 688
Financial Ratio
Balance-sheet-based accruals ratio3 -1.45% 15.25% 9.91% 21.77% 2.66%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Amazon.com Inc. 18.01% 32.91% 49.06% 18.08%
GameStop Corp. 282.88% -233.21% 25.44% -58.58% -0.13%
Lowe’s Cos. Inc. 8.87% -2.92% 2.66% -12.39% 6.39%
TJX Cos. Inc. 7.22% 30.23% 73.65% -109.84% 15.53%
Balance-Sheet-Based Accruals Ratio, Sector
Consumer Discretionary Distribution & Retail 0.00% 15.97% 26.47% 31.62% 12.43%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Discretionary 0.00% 11.66% 12.35% 15.84% 5.07%

Based on: 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-02-02), 10-K (reporting date: 2019-02-03).

1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= 72,77031,375 = 41,395

2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= 41,39541,998 = -603

3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -603 ÷ [(41,395 + 41,998) ÷ 2] = -1.45%

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, Home Depot Inc. improved earnings quality from 2023 to 2024.

Cash-Flow-Statement-Based Accruals Ratio

Home Depot Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Jan 28, 2024 Jan 29, 2023 Jan 30, 2022 Jan 31, 2021 Feb 2, 2020 Feb 3, 2019
Net earnings 15,143 17,105 16,433 12,866 11,242 11,121
Less: Net cash provided by operating activities 21,172 14,615 16,571 18,839 13,723 13,038
Less: Net cash used in investing activities (4,729) (3,140) (2,969) (10,170) (2,653) (2,416)
Cash-flow-statement-based aggregate accruals (1,300) 5,630 2,831 4,197 172 499
Financial Ratio
Cash-flow-statement-based accruals ratio1 -3.12% 14.43% 8.24% 14.26% 0.66%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Amazon.com Inc. -2.63% -8.54% 48.44% 23.04%
GameStop Corp. 350.50% -114.50% 35.34% -91.37% 0.85%
Lowe’s Cos. Inc. 7.91% -4.62% -0.14% -17.28% 6.85%
TJX Cos. Inc. 3.04% 23.97% 55.57% -121.39% 14.48%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Consumer Discretionary Distribution & Retail 0.00% 0.33% -3.95% 28.71% 14.80%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Discretionary 0.00% 4.87% 1.98% 12.19% 3.83%

Based on: 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-02-02), 10-K (reporting date: 2019-02-03).

1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -1,300 ÷ [(41,395 + 41,998) ÷ 2] = -3.12%

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, Home Depot Inc. improved earnings quality from 2023 to 2024.