Richard Sloan from the University of Michigan was first to document what is referred to as the "accrual anomaly". His 1996 paper found that shares of companies with small or negative accruals vastly outperform (+10%) those of companies with large ones.
Nortek's Sloan Ratio for the quarter that ended in Jun. 2016 was -4.89%.
As of Jun. 2016, Nortek has a Sloan Ratio of -4.89%, indicating the company is in the safe zone and there is no funny business with accruals.
Nortek Sloan Ratio % Historical Data
The historical data trend for Nortek's Sloan Ratio % can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
For the Building Materials subindustry, Nortek's Sloan Ratio %, along with its competitors' market caps and Sloan Ratio % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Nortek's Sloan Ratio % Distribution in the Building Materials Industry
For the Building Materials industry and Basic Materials sector, Nortek's Sloan Ratio % distribution charts can be found below:
* The bar in red indicates where Nortek's Sloan Ratio % falls into.
Nortek Sloan Ratio % Calculation
Earnings contain a lot of non cash earnings which is called accruals. The Sloan ratio is a way to identify firms with low non-cash or accrual-derived earnings relative to their cash flow.
Nortek's Sloan Ratio for the fiscal year that ended in Dec. 2015 is calculated as
Nortek's Net Income for the trailing twelve months (TTM) ended in Jun. 2016 was -14.4 (Sep. 2015 ) + 3.9 (Dec. 2015 ) + 2.6 (Mar. 2016 ) + 18.4 (Jun. 2016 ) = $11 Mil.
Nortek's Cash Flow from Operations for the trailing twelve months (TTM) ended in Jun. 2016 was 101.5 (Sep. 2015 ) + 28.5 (Dec. 2015 ) + -8.5 (Mar. 2016 ) + 63.3 (Jun. 2016 ) = $185 Mil.
Nortek's Cash Flow from Investing for the trailing twelve months (TTM) ended in Jun. 2016 was -21.7 (Sep. 2015 ) + -20.7 (Dec. 2015 ) + -5.3 (Mar. 2016 ) + -20.3 (Jun. 2016 ) = $-68 Mil.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Nortek (NAS:NTK) Sloan Ratio % Explanation
A former University of Michigan researcher, Richard Sloan's 1996 paper found that shares of companies with small or negative accruals vastly outperform (+10%) those of companies with large ones. In fact, for the 40-year period between 1962 and 2001, buying the lowest accrual companies and shorting the highest accrual companies resulted in an average annual compounded return of 18%, more than double the S&P 500's 7.4% annual return over the same period.
If the Sloan Ratio is between -10% and 10%, the company is in the safe zone and there is no funny business with accruals.
If the Sloan Ratio is less than between -25% and -10% on the negative side, and between 10% and 25% on the positive side, this is a warning stage of accrual build up.
If the Sloan Ratio is less than -25% or greater than 25%, and this ratio is consistent over several quarters or even years, be careful. Earnings are highly likely to be made up of accruals.
As of Jun. 2016, Nortek has a Sloan Ratio of -4.89%, indicating the company is in the safe zone and there is no funny business with accruals.
Nortek Sloan Ratio % Related Terms
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Nortek Inc was incorporated in Delaware. The Company and its wholly-owned subsidiaries are diversified manufacturers of innovative, branded residential and commercial building products. The Company operates within five reporting segments: the Residential Ventilation ("RESV") segment, the Technology Solutions ("TECH") segment, the Display Mount Solutions ("DMS") segment, the Residential Heating and Cooling ("RHC") segment, and the Custom & Engineered Solutions ("CES") segment. The Company manufactures and sells, primarily in the United States, Canada and Europe. The Company's Residential Ventilation Products segment manufactures and distributes room and whole house ventilation products and other products for the professional remodeling and replacement markets, residential new construction market and DIY market. The principal products of the segment, which are sold under the Broan, NuTone, Venmar, Best and Zephyr brand names, among others, are kitchen range hoods, exhaust fans (such as bath fans and fan, heater and light combination units), and indoor air quality products (such as air exchangers and heat or energy recovery ventilators). The Company's TECH segment manufactures and distributes a broad array of products designed to provide convenience and security for residential and certain commercial applications. The Company's DMS segment manufactures and distributes a broad array of innovative products designed with ergonomic features including wall mounts, carts, arms, desk mounts, workstations, and stands that attach to or support a variety of display devices such as notebook computers, computer monitors, and flat panel displays. The RHC segment principally manufactures and sells split-system and packaged air conditioners and heat pumps, air handlers, furnaces and related equipment, accessories, and parts for the residential replacement and new construction markets, as well as for certain commercial markets. The CES segment manufactures and sells custom-designed and engineered HVAC products and systems, primarily in North America, for non-residential applications that include healthcare and educational facilities, commercial buildings, manufacturing facilities, clean rooms, data centers, and government buildings. The Company is subject to numerous federal, state, local and foreign laws and regulations.
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