A great company can still be a bad stock. It all comes down to expectations.

When a stock’s valuation implies decades of strong profit growth, top- and bottom-line beats may not be enough. On the other hand, when a stock is priced for permanent profit decline, modest growth can make a stock soar.

That’s why quantifying the cash flow expectations baked into a stock price is so important, especially as AI hype drives the market to record levels of overvaluation.

We do this work for over 3,000 stocks, so we can find the most extreme cases where market expectations diverge most from economic truth across the entire US stock market. We find companies whose Core Earnings are stronger than their valuations suggest. And, we find companies whose reported results overstate their Core Earnings.

The goal is simple: identify the best and worst stocks in the entire market.

See everything we published this week below and discover where the market is offering opportunity or hiding risk.

Long Idea:

With strong customer relationships, proven expertise, and growing AI capabilities, this company is poised to profit from larger macro trends. However, the stock is priced for a permanent decline in profits.

This Stock Failed the Core Earnings Test:

Core Earnings shows us companies that are less profitable than the market realizes, like this stock, which was recently removed from the Core Earnings Leaders Index.

Live Podcast on AI + Earnings Watch Party Replay:

We broke down how AI will drive the market’s next move, where the good stocks are buried, and covered the latest earnings results for some of the biggest names in the market. Watch the free replay now! Stocks discussed include CSCO, AMAT, BN, COHR, SPG, CRWV, SMCI, and more.

Upcoming Ideas Dinner:

Pro and Institutional members can register for our next private Ideas Dinner meeting, which will be Tuesday, August 18 at 3pm CT.

Model Portfolio Updates:

We updated our Exec Comp Aligned with ROIC Model Portfolio.

Danger Zone Podcast:

CEO David Trainer joined Chuck Jaffe to discuss why this stock that failed the Core Earnings test is in the Danger Zone.

We hope you had a great week!

See a preview of upcoming research below.

Upcoming Research