Stock Analysis on Net

Target Corp. (NYSE:TGT)

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

Target Corp., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Jan 29, 2022 Jan 30, 2021 Feb 1, 2020 Feb 2, 2019 Feb 3, 2018 Jan 28, 2017
Operating Assets
Total assets 53,811  51,248  42,779  41,290  38,999  37,431 
Less: Cash and cash equivalents 5,911  8,511  2,577  1,556  2,643  2,512 
Operating assets 47,900  42,737  40,202  39,734  36,356  34,919 
Operating Liabilities
Total liabilities 40,984  36,808  30,946  29,993  27,290  26,478 
Less: Current portion of long-term debt and other borrowings 171  1,144  161  1,052  270  1,718 
Less: Long-term debt and other borrowings, excluding current portion 13,549  11,536  11,338  10,223  11,317  11,031 
Operating liabilities 27,264  24,128  19,447  18,718  15,703  13,729 
 
Net operating assets1 20,636  18,609  20,755  21,016  20,653  21,190 
Balance-sheet-based aggregate accruals2 2,027  (2,146) (261) 363  (537) — 
Financial Ratio
Balance-sheet-based accruals ratio3 10.33% -10.90% -1.25% 1.74% -2.57%
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%
GameStop Corp. 61.78% -98.44% -0.19% -121.11% -10.15%
Home Depot Inc. 9.91% 21.77% 2.66% 2.61% -2.02%
Lowe’s Cos. Inc. 2.66% -12.39% 6.39% -14.72% 3.22%
Balance-Sheet-Based Accruals Ratio, Sector
Retailing 0.00% 28.24% 8.65% 5.16% 4.80%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Discretionary 0.00% 13.91% 4.87% 3.28% 4.82%

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= 47,90027,264 = 20,636

2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= 20,63618,609 = 2,027

3 2022 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 2,027 ÷ [(20,636 + 18,609) ÷ 2] = 10.33%

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, Target Corp. improved earnings quality from 2021 to 2022.

Cash-Flow-Statement-Based Accruals Ratio

Target Corp., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Jan 29, 2022 Jan 30, 2021 Feb 1, 2020 Feb 2, 2019 Feb 3, 2018 Jan 28, 2017
Net earnings 6,946  4,368  3,281  2,937  2,934  2,737 
Less: Cash provided by operations 8,625  10,525  7,099  5,970  6,849  5,329 
Less: Cash required for investing activities (3,154) (2,591) (2,944) (3,416) (3,075) (1,473)
Cash-flow-statement-based aggregate accruals 1,475  (3,566) (874) 383  (840) (1,119)
Financial Ratio
Cash-flow-statement-based accruals ratio1 7.52% -18.12% -4.18% 1.84% -4.02%
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%
GameStop Corp. 45.00% -105.52% 0.85% -120.98% -14.73%
Home Depot Inc. 8.24% 14.26% 0.66% 1.98% -4.67%
Lowe’s Cos. Inc. -0.14% -17.28% 6.85% -13.55% -0.81%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Retailing 0.00% 24.70% 9.31% -10.28% -11.71%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Discretionary 0.00% 10.76% 3.70% -3.34% -0.55%

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

1 2022 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,475 ÷ [(20,636 + 18,609) ÷ 2] = 7.52%

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, Target Corp. improved earnings quality from 2021 to 2022.