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InterOil Corp (NYSE:IOC)
Sloan Ratio
-0.26 (As of Jun. 2014)

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.

InterOil Corp's Sloan Ratio for the quarter that ended in Jun. 2014 was -0.26.

InterOil Corp has a Sloan Ratio of -0.26, indicating there is a warning stage of accrual build up.


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.

InterOil Corp's Sloan Ratio for the fiscal year that ended in Dec. 2013 is calculated as

Sloan Ratio=(Net Income (A: Dec. 2013 )-Cash Flow from Operations (A: Dec. 2013 )
-Cash Flow from Investing (A: Dec. 2013 ))/Total Assets (A: Dec. 2013 )
=(-40.358-70.643
--133.464)/1305.799
=0.02

InterOil Corp's Sloan Ratio for the quarter that ended in Jun. 2014 is calculated as

Sloan Ratio=(Net Income (TTM)-Cash Flow from Operations (TTM)
-Cash Flow from Investing (TTM))/Total Assets (Q: Jun. 2014 )
=(339.771-76.999
-631.095)/1400.601
=-0.26

InterOil Corp's Net Income for the trailing twelve months (TTM) ended in Jun. 2014 was -6.318 (Sep. 2013 ) + -24.813 (Dec. 2013 ) + 318.636 (Mar. 2014 ) + 52.266 (Jun. 2014 ) = $340 Mil.
InterOil Corp's Cash Flow from Operations for the trailing twelve months (TTM) ended in Jun. 2014 was 26.14 (Sep. 2013 ) + 61.143 (Dec. 2013 ) + -15.244 (Mar. 2014 ) + 4.96 (Jun. 2014 ) = $77 Mil.
InterOil Corp's Cash Flow from Investing for the trailing twelve months (TTM) ended in Jun. 2014 was -25.626 (Sep. 2013 ) + -44.422 (Dec. 2013 ) + 347.994 (Mar. 2014 ) + 353.149 (Jun. 2014 ) = $631 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their own 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.

InterOil Corp has a Sloan Ratio of -0.26, indicating there is a warning stage of accrual build up.


Related Terms

Net Income, Cash Flow from Operations, Cash Flow from Investing, Total Assets


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

InterOil Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
sloanratio 0.14-0.070.100.070.030.070.000.140.160.02

InterOil Corp Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
sloanratio 0.200.110.130.170.110.140.130.020.01-0.26
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