GAAP Earnings are a flawed metric because of the numerous accounting rule loopholes that open the door for earnings manipulation.
Rather than fix this problem, Wall Street’s solutions (non-GAAP earnings, whisper numbers, and Street Earnings[1]) make it worse. That’s right, non-GAAP earnings, whisper numbers, and Street Earnings tend to be more misleading than GAAP Earnings. Don’t believe us? See Figure 4.
A Real Solution
Rather than rely on flawed data, we use FinSights, our AI agent built for us by Google Cloud, to find companies most likely to miss Street Earnings. Like all of our research, FinSights is fueled by the proprietary data from our Robo-Analyst AI, which analyzes the footnotes of financial filings to calculate Core Earnings, a proven superior measure of earnings.
In this report, we’ll show:
- the frequency and magnitude of overstated GAAP Earnings in the S&P 500,
- Street Earnings are flawed and misleading,
- how Core Earnings generate novel alpha, and
- the five S&P 500 companies most likely to miss Street estimates next quarter.
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