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
Jan 28, 2022 Jan 29, 2021 Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017
Operating Assets
Total assets 44,640  46,735  39,471  34,508  35,291  34,408 
Less: Cash and cash equivalents 1,133  4,690  716  511  588  558 
Less: Short-term investments 271  506  160  218  102  100 
Operating assets 43,236  41,539  38,595  33,779  34,601  33,750 
Operating Liabilities
Total liabilities 49,456  45,298  37,499  30,864  29,418  27,974 
Less: Short-term borrowings —  —  1,941  722  1,137  510 
Less: Current maturities of long-term debt 868  1,112  597  1,110  294  795 
Less: Long-term debt, excluding current maturities 23,859  20,668  16,768  14,391  15,564  14,394 
Operating liabilities 24,729  23,518  18,193  14,641  12,423  12,275 
 
Net operating assets1 18,507  18,021  20,402  19,138  22,178  21,475 
Balance-sheet-based aggregate accruals2 486  (2,381) 1,264  (3,040) 703  — 
Financial Ratio
Balance-sheet-based accruals ratio3 2.66% -12.39% 6.39% -14.72% 3.22%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Amazon.com Inc. 49.06% 18.08% 27.50% 21.63%
Booking Holdings Inc. 1.83% -21.49% -42.38% -18.20%
Dollar Tree Inc. 10.97% -4.23% 0.02% -21.43% 8.15%
Home Depot Inc. 9.91% 21.77% 2.66% 2.61% -2.02%
Target Corp. 10.33% -10.90% -1.25% 1.74% -2.57%
Ulta Beauty Inc. 14.61% -37.93% -0.80% 2.45% 19.23%
Balance-Sheet-Based Accruals Ratio, Sector
Retailing 0.00% 26.36% 8.04% 4.33% 5.48%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Discretionary 0.00% 13.54% 4.76% 3.06% 5.03%

Based on: 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), 10-K (reporting date: 2018-02-02), 10-K (reporting date: 2017-02-03).

1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= 43,23624,729 = 18,507

2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= 18,50718,021 = 486

3 2022 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 486 ÷ [(18,507 + 18,021) ÷ 2] = 2.66%

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. improved earnings quality from 2021 to 2022.

Cash-Flow-Statement-Based Accruals Ratio

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

US$ in millions

Microsoft Excel
Jan 28, 2022 Jan 29, 2021 Jan 31, 2020 Feb 1, 2019 Feb 2, 2018 Feb 3, 2017
Net earnings 8,442  5,835  4,281  2,314  3,447  3,093 
Less: Net cash provided by operating activities 10,113  11,049  4,296  6,193  5,065  5,617 
Less: Net cash used in investing activities (1,646) (1,894) (1,369) (1,080) (1,441) (3,361)
Cash-flow-statement-based aggregate accruals (25) (3,320) 1,354  (2,799) (177) 837 
Financial Ratio
Cash-flow-statement-based accruals ratio1 -0.14% -17.28% 6.85% -13.55% -0.81%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Amazon.com Inc. 48.44% 23.04% -5.12% -20.61%
Booking Holdings Inc. -11.14% -40.67% -76.63% -28.98%
Dollar Tree Inc. 9.52% -5.22% -0.24% -23.91% 7.36%
Home Depot Inc. 8.24% 14.26% 0.66% 1.98% -4.67%
Target Corp. 7.52% -18.12% -4.18% 1.84% -4.02%
Ulta Beauty Inc. 10.02% -49.78% 5.42% -5.92% 24.41%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Retailing 0.00% 22.91% 8.70% -10.20% -9.70%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Discretionary 0.00% 10.41% 3.63% -3.48% -0.20%

Based on: 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), 10-K (reporting date: 2018-02-02), 10-K (reporting date: 2017-02-03).

1 2022 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -25 ÷ [(18,507 + 18,021) ÷ 2] = -0.14%

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. improved earnings quality from 2021 to 2022.