Stock Analysis on Net

Twitter Inc. (NYSE:TWTR)

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

Twitter Inc., balance sheet computation of aggregate accruals

US$ in thousands

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Operating Assets
Total assets 14,059,516  13,379,090  12,703,389  10,162,572  7,412,477 
Less: Cash and cash equivalents 2,186,549  1,988,429  1,799,082  1,894,444  1,638,413 
Less: Short-term investments 4,207,133  5,483,873  4,839,970  4,314,957  2,764,689 
Operating assets 7,665,834  5,906,788  6,064,337  3,953,171  3,009,375 
Operating Liabilities
Total liabilities 6,752,317  5,409,008  3,999,003  3,356,978  2,365,259 
Less: Convertible notes, short-term —  917,866  —  897,328  — 
Less: Finance lease liabilities, short-term —  567  23,476  68,046  84,976 
Less: Convertible notes, long-term 3,559,023  1,875,878  1,816,833  1,730,922  1,627,460 
Less: Senior notes, long-term 693,996  692,994  691,967  —  — 
Less: Finance lease liabilities, long-term —  —  205  24,394  81,308 
Operating liabilities 2,499,298  1,921,703  1,466,522  636,288  571,515 
 
Net operating assets1 5,166,536  3,985,085  4,597,815  3,316,883  2,437,860 
Balance-sheet-based aggregate accruals2 1,181,451  (612,730) 1,280,932  879,023  — 
Financial Ratio
Balance-sheet-based accruals ratio3 25.82% -14.28% 32.37% 30.55%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Alphabet Inc. 22.86% 15.42% 17.54% 28.17%
Charter Communications Inc. -2.64% -2.09% -1.85% -0.51%
Comcast Corp. -0.48% 1.68% 0.12% 31.76%
Meta Platforms Inc. 14.69% 35.56% 8.16% 27.43%
Netflix Inc. 27.24% 10.12% 37.89% 47.69%
Walt Disney Co. 1.73% -4.26% 68.46% 4.72% 6.87%
Balance-Sheet-Based Accruals Ratio, Sector
Media & Entertainment 6.56% 5.00% 17.56% 18.87%
Balance-Sheet-Based Accruals Ratio, Industry
Communication Services 9.21% 6.81% 8.35% 20.64%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 2021 Calculation
Net operating assets = Operating assets – Operating liabilities
= 7,665,8342,499,298 = 5,166,536

2 2021 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2021 – Net operating assets2020
= 5,166,5363,985,085 = 1,181,451

3 2021 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,181,451 ÷ [(5,166,536 + 3,985,085) ÷ 2] = 25.82%

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, Twitter Inc. deteriorated earnings quality from 2020 to 2021.

Cash-Flow-Statement-Based Accruals Ratio

Twitter Inc., cash flow statement computation of aggregate accruals

US$ in thousands

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net income (loss) (221,409) (1,135,626) 1,465,659  1,205,596  (108,063)
Less: Net cash provided by operating activities 632,689  992,870  1,303,364  1,339,711  831,209 
Less: Net cash (used in) provided by investing activities 52,623  (1,560,565) (1,115,974) (2,055,513) (112,932)
Cash-flow-statement-based aggregate accruals (906,721) (567,931) 1,278,269  1,921,398  (826,340)
Financial Ratio
Cash-flow-statement-based accruals ratio1 -19.82% -13.23% 32.30% 66.78%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Alphabet Inc. 17.48% 8.45% 11.72% 17.73%
Charter Communications Inc. -3.46% -2.81% -2.38% -0.69%
Comcast Corp. -0.83% -1.17% 1.21% 24.41%
Meta Platforms Inc. -14.89% 36.04% 4.54% 11.74%
Netflix Inc. 27.32% 4.60% 35.30% 44.39%
Walt Disney Co. -0.29% -4.68% 18.72% 5.26% 1.15%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Media & Entertainment 1.32% 2.73% 6.82% 13.79%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Communication Services 5.83% -0.94% 1.88% 10.27%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 2021 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -906,721 ÷ [(5,166,536 + 3,985,085) ÷ 2] = -19.82%

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, Twitter Inc. deteriorated earnings quality from 2020 to 2021.