Stock Analysis on Net
Stock Analysis on Net

RH (NYSE:RH)

$22.49

This company has been moved to the archive! The financial data has not been updated since May 26, 2023.

Financial Reporting Quality: Aggregate Accruals

Microsoft Excel

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.

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Balance-Sheet-Based Accruals Ratio

RH, balance sheet computation of aggregate accruals

US$ in thousands

Microsoft Excel
Jan 28, 2023 Jan 29, 2022 Jan 30, 2021 Feb 1, 2020 Feb 2, 2019 Feb 3, 2018
Operating Assets
Total assets
Less: Cash and cash equivalents
Less: Restricted cash
Operating assets
Operating Liabilities
Total liabilities
Less: Convertible senior notes due 2024, net
Less: Convertible senior notes due 2023, net
Less: Convertible senior notes due 2020, net
Less: Convertible senior notes due 2019, net
Less: Current portion of term loans
Less: Current finance lease liabilities
Less: Current portion of equipment promissory notes
Less: Asset based credit facility
Less: Term loan B, net
Less: Term loan B-2, net
Less: Term loan, net
Less: Real estate loans
Less: Convertible senior notes due 2024, net
Less: Convertible senior notes due 2023, net
Less: Convertible senior notes due 2020, net
Less: Convertible senior notes due 2019, net
Less: Non-current finance lease liabilities
Less: Non-current portion of equipment promissory notes, net
Operating liabilities
 
Net operating assets1
Balance-sheet-based aggregate accruals2
Financial Ratio
Balance-sheet-based accruals ratio3
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Amazon.com Inc.
Home Depot Inc.
Lowe’s Cos. Inc.
TJX Cos. Inc.
Balance-Sheet-Based Accruals Ratio, Sector
Consumer Discretionary Distribution & Retail
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Discretionary

Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).

1 2023 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =

2 2023 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2023 – Net operating assets2022
= – =

3 2023 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =

4 Click competitor name to see calculations.

Net Operating Assets
The net operating assets show a consistent increase over the observed periods. Starting at approximately 902 million US dollars in early 2019, the value rises steadily each year, reaching nearly 2.44 billion US dollars by early 2023. This represents substantial growth, indicating an expansion in the scale of operating assets over the five-year span.
Balance-sheet-based Aggregate Accruals
The balance-sheet-based aggregate accruals display a fluctuating but overall upward trend. Initially, the accruals were about 53.5 million US dollars in early 2019, then they sharply increased to nearly 396 million US dollars in early 2020. The amount considerably decreased to approximately 152 million US dollars in early 2021, before rising again to 362 million and eventually 623 million US dollars in the subsequent years. This volatility suggests variability in accrual accounting components impacting reported earnings.
Balance-sheet-based Accruals Ratio
The accruals ratio, expressed as a percentage, mirrors the fluctuations found in the aggregate accruals but with notable increases in certain years. Starting at 6.12% in early 2019, the ratio peaks at 35.97% in early 2020, then declines to 11.09% in early 2021. It again increases in the following years to 22.18% and 29.34% respectively. These variations indicate changes in the proportion of accruals relative to net operating assets, which may reflect shifts in earnings recognition policies or operational changes affecting the financial reporting quality.

Cash-Flow-Statement-Based Accruals Ratio

RH, cash flow statement computation of aggregate accruals

US$ in thousands

Microsoft Excel
Jan 28, 2023 Jan 29, 2022 Jan 30, 2021 Feb 1, 2020 Feb 2, 2019 Feb 3, 2018
Net income
Less: Net cash provided by operating activities
Less: Net cash (used in) provided by investing activities
Cash-flow-statement-based aggregate accruals
Financial Ratio
Cash-flow-statement-based accruals ratio1
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Amazon.com Inc.
Home Depot Inc.
Lowe’s Cos. Inc.
TJX Cos. Inc.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Consumer Discretionary Distribution & Retail
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Discretionary

Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).

1 2023 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =

2 Click competitor name to see calculations.

Net Operating Assets
The net operating assets exhibited a consistent upward trend throughout the analyzed periods, increasing from approximately 902.5 million US dollars in early 2019 to about 2.44 billion US dollars by early 2023. This steady growth suggests an expansion in the company's operational scale or investment in productive assets over the five-year span.
Cash-flow-statement-based Aggregate Accruals
The aggregate accruals demonstrated considerable volatility with a negative value of around -13.2 million US dollars in 2019, slightly positive at approximately 3.7 million in 2020, then declining sharply to -31.4 million in 2021. Subsequently, there was a significant positive increase to approximately 220.8 million in 2022, further rising to approximately 296.0 million in 2023. This pattern indicates fluctuations in the timing differences between earnings and cash flows, with substantial positive accruals in the most recent two years potentially signaling changes in revenue recognition, expense deferrals, or working capital adjustments.
Cash-flow-statement-based Accruals Ratio
The accruals ratio mirrored the fluctuations seen in aggregate accruals, starting slightly negative at -1.51% in 2019, minimal positive at 0.34% in 2020, and then decreasing to -2.28% in 2021. A marked increase occurred thereafter, reaching 13.53% in 2022 and slightly rising to 13.93% in 2023. The rise in this ratio in the latest two periods suggests an increasing proportion of accruals relative to net operating assets, which may indicate higher earnings manipulation risk or changes in accrual accounting policies.