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.
CarMax's Sloan Ratio for the quarter that ended in Feb. 2024 was 1.79%.
As of Feb. 2024, CarMax has a Sloan Ratio of 1.79%, indicating the company is in the safe zone and there is no funny business with accruals.
CarMax Sloan Ratio % Historical Data
The historical data trend for CarMax'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 Auto & Truck Dealerships subindustry, CarMax'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.
CarMax's Sloan Ratio % Distribution in the Vehicles & Parts Industry
For the Vehicles & Parts industry and Consumer Cyclical sector, CarMax's Sloan Ratio % distribution charts can be found below:
* The bar in red indicates where CarMax's Sloan Ratio % falls into.
CarMax 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.
CarMax's Sloan Ratio for the fiscal year that ended in Feb. 2024 is calculated as
CarMax's Net Income for the trailing twelve months (TTM) ended in Feb. 2024 was 228.298 (May. 2023 ) + 118.635 (Aug. 2023 ) + 82.003 (Nov. 2023 ) + 50.268 (Feb. 2024 ) = $479 Mil.
CarMax's Cash Flow from Operations for the trailing twelve months (TTM) ended in Feb. 2024 was -185.285 (May. 2023 ) + 124.165 (Aug. 2023 ) + 210.099 (Nov. 2023 ) + 309.638 (Feb. 2024 ) = $459 Mil.
CarMax's Cash Flow from Investing for the trailing twelve months (TTM) ended in Feb. 2024 was -136.759 (May. 2023 ) + -74.992 (Aug. 2023 ) + -145.471 (Nov. 2023 ) + -109.776 (Feb. 2024 ) = $-467 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.
CarMax (NYSE:KMX) 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 Feb. 2024, CarMax has a Sloan Ratio of 1.79%, indicating the company is in the safe zone and there is no funny business with accruals.
CarMax Sloan Ratio % Related Terms
Thank you for viewing the detailed overview of CarMax's Sloan Ratio % provided by GuruFocus.com. Please click on the following links to see related term pages.
CarMax sells, finances, and services used and new cars through a chain of about 240 used retail stores. It was formed in 1993 as a unit of Circuit City and spun off into an independent company in late 2002. Used-vehicle sales typically account for about 83% of revenue (78% in fiscal 2023 due to the chip shortage) and wholesale about 13% (20% in fiscal 2023), with the remaining portion composed of extended service plans and repair. In fiscal 2023, the company retailed and wholesaled 807,823, and 585,071 used vehicles, respectively. CarMax is the largest used-vehicle retailer in the U.S. but still estimates that it has only about 4% U.S. market share of vehicles 0-10 years old in 2022. It seeks over 5% share by the end of calendar 2025. CarMax is based in Richmond, Virginia.
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