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.
Alcoa's Sloan Ratio for the quarter that ended in Sep. 2016 was -2.88%.
As of Sep. 2016, Alcoa has a Sloan Ratio of -2.88%, indicating the company is in the safe zone and there is no funny business with accruals.
Alcoa Sloan Ratio % Historical Data
The historical data trend for Alcoa'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 Aluminum subindustry, Alcoa'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.
Alcoa's Sloan Ratio % Distribution in the Metals & Mining Industry
For the Metals & Mining industry and Basic Materials sector, Alcoa's Sloan Ratio % distribution charts can be found below:
* The bar in red indicates where Alcoa's Sloan Ratio % falls into.
Alcoa 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.
Alcoa's Sloan Ratio for the fiscal year that ended in Dec. 2015 is calculated as
Alcoa's Net Income for the trailing twelve months (TTM) ended in Sep. 2016 was -701 (Dec. 2015 ) + 16 (Mar. 2016 ) + 135 (Jun. 2016 ) + 166 (Sep. 2016 ) = $-384.00 Mil.
Alcoa's Cash Flow from Operations for the trailing twelve months (TTM) ended in Sep. 2016 was 865 (Dec. 2015 ) + -430 (Mar. 2016 ) + 332 (Jun. 2016 ) + 306 (Sep. 2016 ) = $1,073.00 Mil.
Alcoa's Cash Flow from Investing for the trailing twelve months (TTM) ended in Sep. 2016 was -457 (Dec. 2015 ) + -1 (Mar. 2016 ) + 311 (Jun. 2016 ) + -231 (Sep. 2016 ) = $-378.00 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.
Alcoa (AMEX:ARNC.PR.PFD) 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, Alcoa has a Sloan Ratio of -2.88%, indicating the company is in the safe zone and there is no funny business with accruals.
Alcoa Sloan Ratio % Related Terms
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Arconic Inc, formerly known as Alcoa Inc was first incorporated as the Pittsburgh Reduction Company on October 1, 1888. The Company is engaged in manufacturing and engineering lightweight metals. Its products include aluminum, titanium, and nickel, used in aerospace, automotive, commercial transportation, packaging, building and construction, oil and gas, defense, consumer electronics, and industrial applications. The Company is also engaged in the production and management of aluminum, fabricated aluminum, and alumina combined, through its active participation in all aspects of the industry: technology, mining, refining, smelting, fabricating, and recycling. It has investments and operating activities in, among others, Australia, Brazil, China, Guinea, Iceland, Russia, and Saudi Arabia. The Company operates in segments including Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions. The Company's Global Rolled Products segment represents its midstream operations. The Engineered Products and Solutions segment represents a portion of the Company's downstream operations. Its downstream portfolio includes two segments Engineered Products and Solutions and Transportation and Construction Solutions. The Engineered Products and Solutions consist of Alcoa Titanium & Engineered Products; Alcoa Fastening Systems & Rings; Alcoa Forgings and Extrusions; and Alcoa Power and Propulsion. The Company's Transportation and Construction Solutions segment represents a portion of its downstream operations. The raw materials used includes bauxite, alloying materials, caustic soda, alumina, electricity, aluminum fluoride, fuel oil, calcined petroleum coke, lime (CaO), cathode blocks, natural gas, electricity, liquid pitch, natural gas, titanium alloys, titanium sponge and resin. The Company's trademark products include Howmet metal castings, Huck fasteners, Kawneer building panels and Dura-Bright wheels with easy-clean surface treatments.
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