This report provides case studies for exactly how we perform the Detailed Reconciliation of Net Income to NOPAT for the following companies:
- Cesca Therapeutics (THMO)
- Real Goods Solar Inc. (RGSE)
- Navidea Biopharmaceuticals (NAVB)
- ExpresSpa Group Inc. (XSPA)
- Outlook Therapeutics (OTLK)
- Exelixis Inc. (EXEL)
- Newell Brands (NWL)
- General Motors (GM)
- Fortive Corporation (FTV)
These case studies (available only to Pro and above clients) show the original source data used to perform all of our calculations and adjustments. They allow clients to audit our work and serve as supporting documentation for the backtest dataset.
We provide original values and locations for all data in the case studies and Figure 1 below.
GAAP earnings don’t tell the whole story of a company’s profits. They are based on accounting rules originally designed for debt investors, not equity investors, and are often manipulated by companies to manage earnings.
When we calculate net operating profit after-tax (NOPAT), we make numerous adjustments to close accounting loopholes and ensure apples-to-apples comparability across thousands of companies.
Leveraging our Robo-Analyst technology, we analyze all the disclosures in the footnotes and MD&A of financial filings to remove non-core and non-recurring items. By doing so, we create a “novel dataset” of adjustments that we use to calculate a more accurate[1] measure of a firm’s profitability.
Clients can audit all of the unusual items used in our calculations in the Marked-Up Filings section of each of our Company Valuation models. We are 100% transparent about what goes into our research because we want investors to trust our work and see how much goes into building the best earnings quality and valuation models.
Figure 1 shows the detailed adjustments we make to reconcile Cesca Therapeutics’s (THMO) 2018 net income to NOPAT, along with the location each item was found in its 2018 10-K.
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