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.
Discover Financial Services's Sloan Ratio for the quarter that ended in Dec. 2023 was 10.48%.
As of Dec. 2023, Discover Financial Services has a Sloan Ratio of 10.48%, indicating there is a warning stage of accrual build up.
Discover Financial Services Sloan Ratio % Historical Data
The historical data trend for Discover Financial Services'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 Credit Services subindustry, Discover Financial Services'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.
Discover Financial Services Sloan Ratio % Distribution
For the Credit Services industry and Financial Services sector, Discover Financial Services's Sloan Ratio % distribution charts can be found below:
* The bar in red indicates where Discover Financial Services's Sloan Ratio % falls into.
Discover Financial Services 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.
Discover Financial Services's Sloan Ratio for the fiscal year that ended in Dec. 2023 is calculated as
Discover Financial Services's Net Income for the trailing twelve months (TTM) ended in Dec. 2023 was 976 (Mar. 2023 ) + 901 (Jun. 2023 ) + 683 (Sep. 2023 ) + 388 (Dec. 2023 ) = $2,948 Mil.
Discover Financial Services's Cash Flow from Operations for the trailing twelve months (TTM) ended in Dec. 2023 was 1791 (Mar. 2023 ) + 1507 (Jun. 2023 ) + 2389 (Sep. 2023 ) + 2876 (Dec. 2023 ) = $8,563 Mil.
Discover Financial Services's Cash Flow from Investing for the trailing twelve months (TTM) ended in Dec. 2023 was -1229 (Mar. 2023 ) + -7604 (Jun. 2023 ) + -5836 (Sep. 2023 ) + -6822 (Dec. 2023 ) = $-21,491 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.
Discover Financial Services (NYSE:DFS) 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 Dec. 2023, Discover Financial Services has a Sloan Ratio of 10.48%, indicating there is a warning stage of accrual build up.
Discover Financial Services Sloan Ratio % Related Terms
Thank you for viewing the detailed overview of Discover Financial Services's Sloan Ratio % provided by GuruFocus.com. Please click on the following links to see related term pages.
Discover Financial Services (Discover Financial Services) Business Description
Discover Financial Services is a bank operating in two distinct segments: direct banking and payment services. The company issues credit and debit cards and provides other consumer banking products including deposit accounts, students loans, and other personal loans. It also operates the Discover, Pulse, and Diners Club networks. The Discover network is the fourth-largest payment network in the United States as ranked by overall purchase volume, and Pulse is one of the largest ATM networks in the country.
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