Switch to:
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
Keurig Green Mountain Inc (NAS:GMCR)
Sloan Ratio %
-5.32% (As of Dec. 2015)

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.

Keurig Green Mountain Inc's Sloan Ratio for the quarter that ended in Dec. 2015 was -5.32%.

As of Dec. 2015, Keurig Green Mountain Inc has a Sloan Ratio of -5.32%, 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.

Keurig Green Mountain Inc's Sloan Ratio for the fiscal year that ended in Sep. 2015 is calculated as

 Sloan Ratio = (Net Income (A: Sep. 2015 ) - Cash Flow from Operations (A: Sep. 2015 ) - Cash Flow from Investing (A: Sep. 2015 )) / Total Assets (A: Sep. 2015 ) = (498.275 - 754.862 - -498.431) / 4001.577 = 6.04%

Keurig Green Mountain Inc's Sloan Ratio for the quarter that ended in Dec. 2015 is calculated as

 Sloan Ratio = (Net Income (TTM) - Cash Flow from Operations (TTM}) - Cash Flow from Investing (TTM)) / Total Assets (Q: Dec. 2015 ) = (468.193 - 946.784 - -269.422) / 3931.453 = -5.32%

Keurig Green Mountain Inc's Net Income for the trailing twelve months (TTM) ended in Dec. 2015 was 155.479 (Mar. 2015 ) + 113.621 (Jun. 2015 ) + 94.596 (Sep. 2015 ) + 104.497 (Dec. 2015 ) = \$468 Mil.
Keurig Green Mountain Inc's Cash Flow from Operations for the trailing twelve months (TTM) ended in Dec. 2015 was 225.557 (Mar. 2015 ) + 242.137 (Jun. 2015 ) + 144.76 (Sep. 2015 ) + 334.33 (Dec. 2015 ) = \$947 Mil.
Keurig Green Mountain Inc's Cash Flow from Investing for the trailing twelve months (TTM) ended in Dec. 2015 was -33.897 (Mar. 2015 ) + -103.711 (Jun. 2015 ) + -78.391 (Sep. 2015 ) + -53.423 (Dec. 2015 ) = \$-269 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 Dec. 2015, Keurig Green Mountain Inc has a Sloan Ratio of -5.32%, 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.

Keurig Green Mountain Inc Annual Data

 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13 Sep14 Sep15 sloanratio (%) 46.92 1.76 19.20 19.11 44.89 43.35 4.16 -3.38 7.29 6.04

Keurig Green Mountain Inc Quarterly Data

 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 sloanratio (%) -3.38 -1.39 -1.68 -0.78 7.29 14.61 18.59 17.55 6.04 -5.32
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to \$400 per referral. ( Learn More)