The term “accretive” is used in finance to describe an increase in the value of an asset. An accretive event is one that increases the value of a company or security. The term is most often used in reference to acquisitions, but it can also be used in other contexts.
For example, a company might say that an acquisition was accretive to earnings per share (EPS). This means that the acquisition increased the company’s EPS.
In general, an accretive event is one that creates shareholder value.
What is Accretive?
Accretive is an adjective that describes a situation in which something grows or increases at a continuous rate. The term is often used in the context of finance, where it refers to the gradual buildup of value over time. For example, a company that consistently generates positive cash flow and reinvest its earnings is said to be accretive.
In the world of investing, the term “accretive” is used to describe investments that are expected to increase in value over time. For example, a company that is consistently profitable and growing its earnings at a healthy clip is said to be an accretive investment. Likewise, a bond that pays periodic interest payments (coupons) and increases in value as it approaches its maturity date is also considered an accretive investment.
The Difference Between Accretive and Non-Accretive
There are two types of accretion: accretive and non-accretive. Accretive accretion is when the acquired company’s earnings are added to the acquirer’s earnings. Non-accretive accretion is when the acquired company’s earnings are not added to the acquirer’s earnings.
How to Identify an Accretive Company
An accretive company is one whose earnings per share (EPS) is expected to increase following a merger or acquisition. The term can also be used to describe a company that generates high levels of cash flow, which can be used to finance future growth.
To identify an accretive company, investors should look for companies with strong growth prospects and a history of successful acquisitions. In addition, it is important to consider the company’s financial position and its ability to generate cash flow.
Why Is It Important to Be Aware of Whether a Company Is Accretive or Non-Accretive?
There are a few key reasons why it is important to be aware of whether a company is accretive or non-accretive. First, if a company is accretive, it means that it is able to grow its earnings per share (EPS) at a faster rate than the overall market. This can be a key indicator of a company’s future success and earnings potential. Additionally, companies that are accretive are typically able to generate higher returns on equity (ROE), which is another key metric to watch. Finally, companies that are accretive tend to be less risky than their non-accretive counterparts, meaning they may be a better investment for those looking for stability and growth potential.
A Look at Some Examples of Accretive Companies: Apple, Inc.
Apple, Inc. is one of the most well-known and successful companies in the world, and it is also an excellent example of an accretive company. Founded in 1976, Apple has consistently been at the forefront of innovation, releasing groundbreaking products like the Macintosh computer, the iPod, the iPhone, and the iPad. Thanks to its strong financial performance and impressive track record of innovation, Apple is one of the most valuable companies in the world, with a market capitalization of over $1 trillion.
Despite its massive size and success, Apple continues to be an incredibly accretive company. In its most recent fiscal year, Apple generated $265.6 billion in revenue and $53.4 billion in net income, representing year-over-year growth of 16% and 30%, respectively. Even more impressively, Apple achieved these results while repurchasing $74 billion of its own stock and paying out $23 billion in dividends to shareholders. As a result of its strong financial performance, Apple’s share price has increased by almost 50% over the past year.
Looking ahead, Apple appears well-positioned to continue its streak of accretive growth. The company has a large and loyal customer base, a growing footprint in key markets like China and India, and a strong product pipeline that includes new versions of existing products like the iPhone and iPad as well as completely new product categories like the Apple Watch. With its massive scale, impressive track record, and
What Is Accretive? – Accretive Financial Definition
The term “accretive” is used in finance to describe the increase in the value of a security over time. The accretion process is the result of the reinvestment of interest and principal payments made on a bond or other debt instrument.
For example, let’s say you purchase a $1,000 bond with a 5% coupon rate. This means that you will receive $50 in interest payments each year. If you reinvest those interest payments back into the bond, you will start to earn interest on your original investment plus the interest payments you have reinvested. Over time, the value of your bond will increase, or “accrete.”
The accretive process can also work in reverse. If the interest payments on a bond are not reinvested, the value of the bond will decrease over time. This is known as “negative accretion.”
