Stock Analysis on Net
Stock Analysis on Net

Lowe’s Cos. Inc. (NYSE:LOW)

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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.

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Balance-Sheet-Based Accruals Ratio

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

US$ in millions

Microsoft Excel
Jan 31, 2025 Feb 2, 2024 Feb 3, 2023 Jan 28, 2022 Jan 29, 2021 Jan 31, 2020
Operating Assets
Total assets
Less: Cash and cash equivalents
Less: Short-term investments
Operating assets
Operating Liabilities
Total liabilities
Less: Short-term borrowings
Less: Current maturities of long-term debt
Less: Long-term debt, excluding current maturities
Operating liabilities
 
Net operating assets1
Balance-sheet-based aggregate accruals2
Financial Ratio
Balance-sheet-based accruals ratio3
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Amazon.com Inc.
Home Depot Inc.
TJX Cos. Inc.
Balance-Sheet-Based Accruals Ratio, Sector
Consumer Discretionary Distribution & Retail
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Discretionary

Based on: 10-K (reporting date: 2025-01-31), 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).

1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =

2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= – =

3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =

4 Click competitor name to see calculations.

Net Operating Assets
The net operating assets exhibited relative stability over the examined periods, fluctuating between approximately 17,974 million and 19,643 million US dollars. There was a slight increase from 18,021 million in early 2021 to a peak of 19,643 million in early 2024, followed by a modest decline to 19,123 million in early 2025. This pattern suggests a generally stable asset base with minor variations that may reflect operational adjustments or asset revaluation.
Balance-sheet-based Aggregate Accruals
The aggregate accruals demonstrated notable volatility during the periods observed. Starting with a negative accrual of -2,381 million US dollars in 2021, the figure shifted sharply to a positive 486 million in 2022, then declined again to a negative -533 million in 2023. Subsequently, there was a significant increase to 1,669 million in 2024, followed by a drop back to negative -520 million in 2025. This irregular pattern indicates inconsistent recognition of accruals, which may affect earnings quality and reflect varying estimation practices or changes in operational conditions.
Balance-sheet-based Accruals Ratio
The accruals ratio, expressed as a percentage of net operating assets, mirrored the volatility observed in aggregate accruals. It started at -12.39% in 2021, moved to a positive 2.66% in 2022, and declined again to -2.92% in 2023. The ratio then sharply increased to 8.87% in 2024 before decreasing to -2.68% in 2025. These fluctuations highlight varying degrees of accrual magnitude relative to the asset base, suggesting inconsistencies in earnings components that could impact the predictability and reliability of reported financial performance.

Cash-Flow-Statement-Based Accruals Ratio

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

US$ in millions

Microsoft Excel
Jan 31, 2025 Feb 2, 2024 Feb 3, 2023 Jan 28, 2022 Jan 29, 2021 Jan 31, 2020
Net earnings
Less: Net cash provided by operating activities
Less: Net cash used in investing activities
Cash-flow-statement-based aggregate accruals
Financial Ratio
Cash-flow-statement-based accruals ratio1
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Amazon.com Inc.
Home Depot Inc.
TJX Cos. Inc.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Consumer Discretionary Distribution & Retail
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Discretionary

Based on: 10-K (reporting date: 2025-01-31), 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).

1 2025 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =

2 Click competitor name to see calculations.

Net Operating Assets
The net operating assets exhibited a relatively stable pattern over the reported periods, with figures fluctuating between approximately 17,974 million US dollars and 19,643 million US dollars. The value started at 18,021 million in early 2021 and increased slightly to 18,507 million by early 2022. There was a minor decline to 17,974 million in early 2023, followed by a notable rise to 19,643 million in early 2024, before decreasing again to 19,123 million in early 2025. Overall, the net operating assets demonstrated modest variability without a consistent upward or downward trajectory.
Cash-Flow-Statement-Based Aggregate Accruals
The aggregate accruals based on the cash flow statement displayed significant volatility across the years. Initially, there was a substantial negative figure of -3,320 million US dollars in early 2021, which almost neutralized to -25 million in early 2022. This was followed by a moderate negative accrual of -843 million in early 2023. A notable shift occurred in early 2024, with accruals turning positive to 1,487 million, indicating a departure from previous trends. By early 2025, the value returned to negative territory at -930 million. These fluctuations indicate irregular accrual patterns, reflecting varying adjustments in reported earnings and cash flows over time.
Cash-Flow-Statement-Based Accruals Ratio
The accruals ratio, expressed as a percentage, also showed marked variations consistent with the aggregate accruals trend. Beginning at a significantly negative -17.28% in early 2021, the ratio approached near zero at -0.14% in early 2022. It then moved into moderately negative territory at -4.62% in early 2023, before surpassing zero to a positive 7.91% in early 2024. In early 2025, the ratio reverted to a negative value of -4.8%. This oscillation suggests fluctuating quality of earnings and potential shifts in the recognition and timing of revenues and expenses captured in the cash flow statement over the periods analyzed.