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GuruFocus has detected 3 Warning Signs with Dollar Tree Inc \$DLTR.
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Dollar Tree Inc (NAS:DLTR)
Sloan Ratio %
-1.87% (As of Jan. 2017)

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.

Dollar Tree Inc's Sloan Ratio for the quarter that ended in Jan. 2017 was -1.87%.

As of Jan. 2017, Dollar Tree Inc has a Sloan Ratio of -1.87%, indicating the company is in the safe zone and there is no funny business with accruals.

Definition

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.

Dollar Tree Inc's Sloan Ratio for the fiscal year that ended in Jan. 2017 is calculated as

 Sloan Ratio = (Net Income (A: Jan. 2017 ) - Cash Flow from Operations (A: Jan. 2017 ) - Cash Flow from Investing (A: Jan. 2017 )) / Total Assets (A: Jan. 2017 ) = (896.2 - 1673.3 - -483.6) / 15701.6 = -1.87%

Dollar Tree Inc's Sloan Ratio for the quarter that ended in Jan. 2017 is calculated as

 Sloan Ratio = (Net Income (TTM) - Cash Flow from Operations (TTM}) - Cash Flow from Investing (TTM)) / Total Assets (Q: Jan. 2017 ) = (896.3 - 1673.3 - -483.6) / 15701.6 = -1.87%

Dollar Tree Inc's Net Income for the trailing twelve months (TTM) ended in Jan. 2017 was 232.7 (Apr. 2016 ) + 170.2 (Jul. 2016 ) + 171.6 (Oct. 2016 ) + 321.8 (Jan. 2017 ) = \$896 Mil.
Dollar Tree Inc's Cash Flow from Operations for the trailing twelve months (TTM) ended in Jan. 2017 was 311 (Apr. 2016 ) + 369.3 (Jul. 2016 ) + -25 (Oct. 2016 ) + 1018 (Jan. 2017 ) = \$1,673 Mil.
Dollar Tree Inc's Cash Flow from Investing for the trailing twelve months (TTM) ended in Jan. 2017 was -92.8 (Apr. 2016 ) + -179.6 (Jul. 2016 ) + -95.9 (Oct. 2016 ) + -115.3 (Jan. 2017 ) = \$-484 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

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.

According to How to Beat the Market with the Sloan Ratio:

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 Jan. 2017, Dollar Tree Inc has a Sloan Ratio of -1.87%, indicating the company is in the safe zone and there is no funny business with accruals.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Dollar Tree Inc Annual Data

 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 sloanratio (%) -8.02 -3.52 -2.10 10.62 -4.81 7.37 4.60 -0.82 40.62 -1.87

Dollar Tree Inc Quarterly Data

 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 sloanratio (%) 2.65 -0.82 66.15 39.95 40.02 40.62 -4.72 -1.52 -1.32 -1.87
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