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.
CVS Health's Sloan Ratio for the quarter that ended in Dec. 2023 was 6.33%.
As of Dec. 2023, CVS Health has a Sloan Ratio of 6.33%, indicating the company is in the safe zone and there is no funny business with accruals.
CVS Health Sloan Ratio % Historical Data
The historical data trend for CVS Health'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 Healthcare Plans subindustry, CVS Health'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.
CVS Health Sloan Ratio % Distribution
For the Healthcare Plans industry and Healthcare sector, CVS Health's Sloan Ratio % distribution charts can be found below:
* The bar in red indicates where CVS Health's Sloan Ratio % falls into.
CVS Health 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.
CVS Health's Sloan Ratio for the fiscal year that ended in Dec. 2023 is calculated as
CVS Health's Net Income for the trailing twelve months (TTM) ended in Dec. 2023 was 2136 (Mar. 2023 ) + 1901 (Jun. 2023 ) + 2261 (Sep. 2023 ) + 2046 (Dec. 2023 ) = $8,344 Mil.
CVS Health's Cash Flow from Operations for the trailing twelve months (TTM) ended in Dec. 2023 was 7438 (Mar. 2023 ) + 5908 (Jun. 2023 ) + 2716 (Sep. 2023 ) + -2636 (Dec. 2023 ) = $13,426 Mil.
CVS Health's Cash Flow from Investing for the trailing twelve months (TTM) ended in Dec. 2023 was -8514 (Mar. 2023 ) + -10362 (Jun. 2023 ) + -771 (Sep. 2023 ) + -1242 (Dec. 2023 ) = $-20,889 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.
CVS Health (NYSE:CVS) 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 Dec. 2023, CVS Health has a Sloan Ratio of 6.33%, indicating the company is in the safe zone and there is no funny business with accruals.
CVS Health Sloan Ratio % Related Terms
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CVS Health offers a diverse set of healthcare services. Its roots are in its retail pharmacy operations, where it operates over 9,000 stores primarily in the U.S. CVS is also the largest pharmacy benefit manager (acquired through Caremark), processing over 2 billion adjusted claims annually. It also operates a top-tier health insurer (acquired through Aetna) where it serves about 26 million medical members. The company's recent acquisition of Oak Street adds primary care services to the mix, which could have significant synergies with all its existing business lines.
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