Byron Macleod  by Byron Macleod
  Associate Director of Research, Gradient Analytics LLC (a Sabrient Systems company)

In any given quarter for almost every company, there is often a swirling vortex of different signals as to the long-term health and future opportunities for each particular firm. Within this conflux of signals, there are two that often cause investor stress and confusion when they contradict each other: the firm’s GAAP versus non-GAAP earnings.

The simple rubric that often comes to mind is that GAAP earnings are the more conservative figure for the firm [as these accounting standards are closely monitored and controlled by a governing board, the Financial Accounting Standards Board (FASB)], while its non-GAAP earnings are the more optimistic view (after being heavily tweaked and adjusted by management). However, this assumption does not always hold true. Often, a firm’s non-GAAP results will be the more accurate representation of its historical earnings power.

Although Gradient Analytics specializes in forensic accounting research and consulting to identify weak earnings quality for short idea generation, our expertise is also valuable for identifying solid earnings quality for the vetting of long candidates, as we discussed in a previous article. And with the impacts of the coronavirus still working their way through both the US and global economies, it is a certainty that the next twelve months of corporate financial reports will be littered with a variety of non-GAAP adjustments that will need to be deciphered.

With this flood of adjusted earnings about to hit the market, we felt it would be a good time for some examples to illustrate that not all non-GAAP adjustments are created equal, and although investors need to carefully consider when and how they use non-GAAP results, often they may be better served by focusing on non-GAAP earnings.  Read on....

gradient / Tag: accounting, earnings quality, GAAP, non-GAAP, tax, IRS, FASB, APO, MET, NKE / 0 Comments

With European markets closed for Easter on Monday and Asia soured by poor economic reports from both China and Japan, it was up to the domestic ISM report and the Construction Spending reports to give the market a boost.

david / Tag: APO, JAZZ, SNTS, XHB / 0 Comments

After a long weekend, the market got a decent start to the new week from favorable European economic reports this morning and our own political “calm before the storm.” Last week was frankly more upbeat than many expected as the market continued its advance to new highs, albeit slowly. And it was a quiet one ahead of the President’s Day weekend with a less partisan State of The Union speech from the President.

david / Tag: BX, APO, KKR, CLMT / 0 Comments

On December 31, 2012, we announced 4 bonus stocks for Baker’s Dozen, stocks that didn’t qualify for the Baker’s Dozen UIT because they were partnerships, rather than corporations. These four stocks have gained an average of +18.22% for the first 6 weeks of 2013 (as of 2/15/13 market close)!  These figures, by the way, do not include dividends, and all four stocks have healthy dividend yields.

The Blackstone Group LP (BX), +20.46% 

Apollo Global Management LLC (APO), +24.93%

Kohlberg Kravis Roberts & Co. (KKR), +14.77% 

walter / Tag: BX, APO, KKR, CLMT / 0 Comments

Editor’s Note: Walter Gault is this week’s author. David Brown will be back next week.

walter / Tag: STX, JBLU, UTHR, CELG, KKR, APO, BX / 0 Comments