Monday, November 6, 2017

We’re big fans of cash here at Calcbench. So as third quarter earnings continue to roll in, we decided to visit our Data Query Tool and take a quick peek at trends in cash among the S&P 500 for the last few quarters.

In absolute terms, the numbers are good. The average amount of cash reported among the S&P 500 so far this quarter is $3.71 billion, up 14.9 percent from the year-ago period. Total cash reported so far is $1.35 trillion—not nearly as much as the $1.6 trillion reported in third-quarter 2016, but we still have another 135 companies in the S&P 500 yet to file.

If those latecomers also report cash piles close to the $3.71 billion average we’ve seen so far this quarter, then the Q3 reporting season is going to close with somewhere near $1.8 trillion in cash. That would be the biggest quarterly number we’ve seen in nearly five years. See Figure 1, below.

Now, could all those latecomers still report pitiful cash holdings, and pull that average down? In theory, sure. But for third-quarter 2017 to land somewhere near Q3 2016 levels, with total cash around $1.6 trillion, the remaining companies would need to report cash at much lower levels than we’ve seen so far this quarter—somewhere around $1.88 billion per latecomer. Decide for yourself whether that’s likely to happen, or whether we’re on our way to quarter with cash all over the place.

Cash vs. Assets

Investors do not live by cash alone, however. We also looked at assets reported by the S&P 500, and how that number relates to the cash outlined above. Here the picture is a bit more mixed.

Much like cash, average assets reported so far this quarter are way up: a 25.6 percent increase, from $66.6 billion in third quarter 2016, to $83.7 billion so far this quarter. And total assets reported by the whole group so far is lower than the year-ago period, $30.72 trillion compared to $33.2 trillion. See Figure 2, below.

But again, we still have 130+ companies yet to file their third-quarter 2017 reports. So unless they all drop a stink bomb on Wall Street, assets are going to look impressive this quarter, too.

Lastly, we calculated cash as a percentage of total assets. Here we can see that the percentage is rather volatile from one quarter to the next, but heading decidedly downward in the last 12 months. Figure 3, below.

If cash piles are trending upward in dollar terms, but trending downward as a portion of total assets in percentage terms— that means assets overall are trending upward even faster than cash is.

Is that a good thing? Does it raise other questions about balance sheets overall, and how well companies are putting their assets to work?

Every company probably has its own answers to those questions, and they are answers for you to judge. Calcbench just pulls together the data for you, and lets you see what’s really going on at the single filer and macro-economic levels.

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