Non-GAAP earnings are in the Danger Zone this week. Companies usually pitch these alternative metrics as “supplementary” data to help investors get a “better” view of the profitability of the business. Instead, we see red flags, not a better view. Non-GAAP statements are unaudited, so companies can do whatever they want with them. Most of the time, they use them to make the company look as profitable as possible. In other words, the goal is not necessarily to better inform investors.
In reality, non-GAAP earnings tend to be more misleading than GAAP earnings, much more. Have you ever seen non-GAAP earnings below GAAP earnings? I doubt it.
Non-GAAP Greatest Hits
We’ve called out several companies for their creative non-GAAP accounting in the past. Below are some of the worst offenders:
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