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.
LinkedIn's Sloan Ratio for the quarter that ended in Sep. 2016 was -1.91%.
As of Sep. 2016, LinkedIn has a Sloan Ratio of -1.91%, indicating the company is in the safe zone and there is no funny business with accruals.
LinkedIn Sloan Ratio % Historical Data
The historical data trend for LinkedIn'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.
Competitive Comparison of LinkedIn's Sloan Ratio %
For the Internet Content & Information subindustry, LinkedIn'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.
LinkedIn's Sloan Ratio % Distribution in the Interactive Media Industry
For the Interactive Media industry and Communication Services sector, LinkedIn's Sloan Ratio % distribution charts can be found below:
* The bar in red indicates where LinkedIn's Sloan Ratio % falls into.
LinkedIn 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.
LinkedIn's Sloan Ratio for the fiscal year that ended in Dec. 2015 is calculated as
LinkedIn's Net Income for the trailing twelve months (TTM) ended in Sep. 2016 was -8.425 (Dec. 2015 ) + -45.827 (Mar. 2016 ) + -119.265 (Jun. 2016 ) + 8.559 (Sep. 2016 ) = $-165 Mil.
LinkedIn's Cash Flow from Operations for the trailing twelve months (TTM) ended in Sep. 2016 was 176.606 (Dec. 2015 ) + 252.187 (Mar. 2016 ) + 332.423 (Jun. 2016 ) + 373.277 (Sep. 2016 ) = $1,134 Mil.
LinkedIn's Cash Flow from Investing for the trailing twelve months (TTM) ended in Sep. 2016 was -307.289 (Dec. 2015 ) + -41.419 (Mar. 2016 ) + -408.18 (Jun. 2016 ) + -398.169 (Sep. 2016 ) = $-1,155 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.
LinkedIn (NYSE:LNKD) 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 Sep. 2016, LinkedIn has a Sloan Ratio of -1.91%, indicating the company is in the safe zone and there is no funny business with accruals.
LinkedIn Sloan Ratio % Related Terms
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LinkedIn Corp was incorporated in Delaware on March 6, 2003, under the name LinkedIn, Ltd. and changed its name to LinkedIn Corporation in January 2005. The Company operates an online professional network on the Internet through which the Company's members are able to create, manage and share their professional identities online, build and engage with their professional networks, access shared knowledge and insights, and find business opportunities, enabling them to be more productive and successful. The Company currently has approximately over 400 million members in over 200 countries and territories. The Company offers free solutions including Stay Connected & Informed, Advance My Career and Ubiquitous Access; and Monetized Solutions including Talent Solutions, Marketing Solutions, and Premium Subscriptions. Its comprehensive platform provides members with solutions, including applications and tools, to search, connect and communicate with business contacts, learn about attractive career opportunities, join industry groups, research organizations and share information. The Company provides the following key benefits to their members: ability to manage their professional identity, enhanced ability to build and engage with their professional network, access to knowledge, insights and opportunities, aid in matching talent with opportunity, an efficient marketing channel, targeted advertising, and an increase in employee productivity. In addition, its core value of putting members first may conflict with the short-term interests of its business, the number of its registered members is higher than the number of actual members, and a substantial majority of its page views are generated by a minority of its members. Finally, it expects to face increasing competition in the market for online professional networks. The Company is subject to a number of foreign and domestic laws and regulations that affect companies conducting business online, many of which are still evolving and could be interpreted in ways that could harm its business.
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