The quality of Wall Street research has been steadily going down over the last couple of decades.
To phrase that sentence better: Wall Street analysts are becoming more manipulative. One of their most devious tricks is to publish lower EPS estimates for stocks they like so it is easier for the companies to “beat”.
Frankly, there isn’t much substance to Wall Street research nowadays, just narratives and added confusion to hide the truth.
How are investors supposed to see through this noise? Our CEO, David Trainer, not only outlined the problem but also provided solutions during his appearance on the Value Spotlight podcast. Check it out below.
To cut through the misleading narratives, investors need rigorous, independent research grounded in sound economic principles.
Proven metrics such as return on invested capital (ROIC) and economic earnings offer a more accurate view of a company’s true profitability than the often misleading "adjusted" metrics that dominate modern earnings releases.
These adjusted figures, particularly adjusted EBITDA, are rife with inconsistencies. Not only do companies differ in how they calculate this metric, but they also commonly exclude legitimate operating expenses, which only, inflates profitability. This practice paints a rosier picture of financial health than reality warrants.
The structural incentives on Wall Street to uphold bullish ratings have contributed to the widespread use of these customized, non-GAAP metrics.
Adjustments are just the tip of the iceberg, though, when it comes to misleading metrics. Companies often exploit both legal and, at times, borderline illegal accounting practices to obscure real expenses and financial risks.
Where do companies hide these crucial details?
They are buried deep in the footnotes and MD&A sections of company filings, or the areas routinely overlooked by most investors and many research firms.
The only way to truly understand the health of the underlying business of a company is to go through the footnotes in the filings.
There are no shortcuts to truly understanding a company’s financial health. It requires thorough, diligent analysis of the complete financial filings, the kind of analysis we specialize in.
Lucky for you if you are reading this message, you’ve already found a resource that delivers proven-superior, footnote-level data and research at scale – empowering you to compete on more equal footing with Wall Street. To learn more, watch the replay of our appearance in the Value Spotlight podcast.
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This article was originally published on June 23, 2025.
Disclosure: David Trainer, Kyle Guske II, and Hakan Salt receive no compensation to write about any specific stock, style, or theme.
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