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.
Rackspace Hosting's Sloan Ratio for the quarter that ended in Sep. 2016 was -7.96%.
As of Sep. 2016, Rackspace Hosting has a Sloan Ratio of -7.96%, indicating the company is in the safe zone and there is no funny business with accruals.
Rackspace Hosting Sloan Ratio % Historical Data
The historical data trend for Rackspace Hosting'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 Rackspace Hosting's Sloan Ratio %
For the Information Technology Services subindustry, Rackspace Hosting'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.
Rackspace Hosting's Sloan Ratio % Distribution in the Software Industry
For the Software industry and Technology sector, Rackspace Hosting's Sloan Ratio % distribution charts can be found below:
* The bar in red indicates where Rackspace Hosting's Sloan Ratio % falls into.
Rackspace Hosting 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.
Rackspace Hosting's Sloan Ratio for the fiscal year that ended in Dec. 2015 is calculated as
Rackspace Hosting's Net Income for the trailing twelve months (TTM) ended in Sep. 2016 was 31.1 (Dec. 2015 ) + 48.8 (Mar. 2016 ) + 35.8 (Jun. 2016 ) + 38.6 (Sep. 2016 ) = $154 Mil.
Rackspace Hosting's Cash Flow from Operations for the trailing twelve months (TTM) ended in Sep. 2016 was 204 (Dec. 2015 ) + 156.2 (Mar. 2016 ) + 164.9 (Jun. 2016 ) + 148.8 (Sep. 2016 ) = $674 Mil.
Rackspace Hosting's Cash Flow from Investing for the trailing twelve months (TTM) ended in Sep. 2016 was -142.9 (Dec. 2015 ) + -58.9 (Mar. 2016 ) + -87.6 (Jun. 2016 ) + -67.2 (Sep. 2016 ) = $-357 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.
Rackspace Hosting (NYSE:RAX) 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, Rackspace Hosting has a Sloan Ratio of -7.96%, indicating the company is in the safe zone and there is no funny business with accruals.
Rackspace Hosting Sloan Ratio % Related Terms
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Rackspace Hosting (Rackspace Hosting) Business Description
Rackspace Hosting Inc was incorporated in Delaware in March 2000. The Company, through its operating subsidiaries, is a provider of cloud computing services, managing web-based IT systems for small and medium-sized businesses as well as large enterprises. It offers a portfolio of integrated IT solutions for common business needs, including for ecommerce, web content management, website hosting, data services, office mail and collaboration, and private clouds. It also offers advisory services for technology strategy, security and compliance, application assessment and migration, and DevOps automation. It offers its solutions across a variety of IT form factors, including multi-tenant public cloud, dedicated single-tenant servers, private cloud, and hybrid cloud - all delivered with a commitment to open and standard technologies. Its marketing activities include web-based paid and natural search, participation in technology trade shows, conferences and customer events, advertisements in traditional and electronic (web and email-based) media, and targeted regional public relations activities. Its trademark includes Rackspace, Fanatical Support, and RackConnect. The Company is subject to U.S. federal income tax and various state, local, and international income taxes in numerous jurisdictions.
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