As a short-term predictor of the likelihood of a company to miss expectations in the next quarter, our GAAP Earnings Distortion Score and Street Earnings Distortion Score complementcompliments, but does not override, our longer-term Risk/Reward ratings.

We measure Earnings Distortion (as featured on CNBC Squawk Box) based on our proprietary and superior fundamental data.

The Bloomberg New Constructs Core Earnings Leaders Index (ticker: BCORET:IND), which invests in stocks based entirely on Core Earnings power, proves our Core Earnings & Earnings Distortion data delivers a novel source of alpha. The index beat the S&P 500 Total Return by 897 basis points in 2025.

This peer-reviewed paper, Core Earnings: New Data & Evidence in The Journal of Financial Economics, also proves the superiority of our data and models.

We leverage our superior dataset of unusual gains/losses to derive GAAP Earnings Distortion and Street Earnings Distortion Scores for 3,300+ stocks. These scores indicate how likely companies are to beat or miss estimates based on how much unusual gains/losses cause earnings measures to be over/understated.

• • The GAAP Earnings Distortion Score formula is: GAAP Earnings Distortion divided by Total Assets.
  • The Street Earnings Distortion Score formula is: Street Earnings Distortion divided by Total Assets.

We decile these values and, then, categorize into a 5-tier scoring system:

1. Strong Beat – Top decile (Least earnings distortion)
2. Beat – Second and third Decile
3. In line – Fourth, fifth, sixth and seventh decile
4. Miss – Eighth and ninth decile
5. Strong Miss – Bottom decile (Most earnings distortion)

We scale Earnings Distortion in both calculations by total assets so large companies don’t dominate the rankings, as they are likely to have more earnings distortion simply due to their size. Further, this approach mirrors the strategy in “Core Earnings: New Data and Evidence”, which presents a long/short strategy that delivers abnormal returns of 7-10% annually based on our proprietary Earnings Distortion data.

Our Earnings Distortion Scores empower investors to combat management manipulation of earnings. For more on how to use our Earnings Distortion Scores, click here.

Earnings Distortion is the non-core, non-operating, and unusual gains/losses that must be stripped out when calculating Core Earnings. As seen above, Earnings Distortion is a key metric in our calculation of Earnings Distortion Scores.

We calculate two similar, but distinct, versions of Earnings Distortion using our proprietary and superior fundamental data: GAAP Earnings Distortion and Street Earnings Distortion.

GAAP Earnings Distortion = Net Income Minus Core Earnings

Street Earnings Distortion = Street Earnings Minus Core Earnings

Both versions calculate Earnings Distortion in the same way, but GAAP Earnings Distortion measures the distortion in GAAP Earnings, while Street Earnings Distortion measures the Distortion in Street Earnings.

Get more details on Core Earnings Distortion here.

Professional and higher members can access the GAAP Earnings Distortion Score for all tickers in their Portfolio by expanding the rating details using the “+” button in the first column of the Portfolio page.