The Journal of Financial Economics published Core Earnings: New Data & Evidence, which proves:

  1. Legacy fundamental datasets are seriously flawed.
  2. Only our “novel database” enables investors to overcome those flaws.
  3. Our proprietary measures of Core Earnings and Earnings Distortion provide idiosyncratic alpha.
Learn more about the best fundamental research

Now, all investors, not just Wall Street insiders, can properly assess corporate profits after excluding the unusual gains and losses that companies bury in footnotes, which legacy earnings measures, such as I/B/E/S Street Earnings or S&P Global’s (SPGI) Operating Earnings, miss.

Here's more poof of the superiority of our data, models and stock ratings.

Examples of how flawed legacy research is: 47% of the S&P 500 Firms Overstate EPS by >10%

Using our more reliable fundamental data, we find that 74% of S&P 500 companies have overstated Street Earnings per share, and 26% have understated Street Earnings per share over the trailing twelve months ended calendar 1Q21[1].

47% of S&P 500 companies have overstated EPS compared to our Core EPS by more than 10%, while 12% of S&P 500 companies have understated EPS by more than 10%. When companies overstate EPS, they do so by an average of 31%. When they understate EPS, they do so by an average of 55%.

Figure 1: Street Earnings for the S&P 500 Are Materially Misleading

Sources:  New Constructs, LLC and company filings.

SPGI’s Operating Earnings Are Misleading, Too

Per Figure 2 (from our review of 1Q21 Core Earnings for the S&P 500), SPGI’s Operating Earnings exaggerated the drop in profitability during 2020 and are overstating the rebound in S&P 500 earnings over the last 18 months. I/B/E/S Street Earnings show a similar trend as more companies have overstated Street EPS estimates than understated Street EPS estimates.

Figure 2: Core Earnings vs. SPGI Operating Earnings: December 2019 to Present (through 5/19/21[2])

Sources:  New Constructs, LLC and company filings.

Our Research Is More Reliable

Most investors were not aware that legacy fundamental datasets suffer from significant flaws when compared to Core Earnings[3] until the publication of Core Earnings: New Data and Evidence.

The authors, professors from Harvard Business School and MIT Sloan, invested years of research into the paper. After it was rigorously reviewed by experts, The Journal of Financial Economics, a top-three peer-reviewed journal in the world, selected it for publication.

With the 100% transparency of our models, the authors could unequivocally demonstrate the differences in our data and models versus legacy firms. We eagerly share the unrivalled rigor of our research.

The paper also highlights the difficulty in collecting critical data from the footnotes and the MD&A. It underscores the unrivaled efficacy of our Robo-Analyst technology for intelligently analyzing complex financial statements and disclosures at unprecedented scale.

Sign up for our research here (individuals). Pros can sign up here.

This article originally published on January 12, 2021.

Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, style, or theme.

Follow us on Twitter, Facebook, LinkedIn, and StockTwits for real-time alerts on all our research.

[1] The most recent Core Earnings and Street Earnings values are based on the latest audited financial data from calendar 1Q21 10-Qs.

[2] The earliest date that the 1Q21 10-Qs for all S&P 500 constituents were available.

[3]As proven in Core Earnings: New Data & Evidence, a paper in The Journal of Financial Economics, only Core Earnings enable investors to overcome the flaws in legacy fundamental data and research.

Click here to download a PDF of this report.

    7 replies to "It’s Official: We Offer the Best Fundamental Data in the World"

    • Howard Snevel

      Very educating

    • Michael Scott Allen

      Sounds great. Where do I sign-up?

    • Matt Shuler

      Michael,

      You can sign up here. Thanks!

    • Eric S Orner

      Your reseach seems great, but the performance of your ratings seems fairly weak. Do you ratings perform better with stocks or ETFs?

    • Matt Shuler

      Eric,

      Our ETF ratings are linked to our stock ratings. We rate ETFs based on our ratings of their holdings. For a look recent performance of our “See Through the Dip” thesis which utilizes our reliable fundamental data see Figure 5. At the end of 4Q20, our Most Attractive Stocks Model Portfolio had an annualized return of 9.6% since its inception in 2005 vs. 7.5% for the S&P 500 and 7.9% for the Russell 2000 over the same time. Thanks for the question.

    • clint

      I’m surprised my F Ford stock has a poor rating, ROIC #5 cash flow #5 Eco #3
      how is that, its one of the best stocks, analysys reads Mod Buy? thanks

    • Matt Shuler

      Clint,

      Thanks for the question. Our Stock Ratings are designed to measure the strength of the underlying business and the valuation of the stock over the trailing twelve month period. If Ford returns to historical levels of profitability, then it will likely earn a higher risk/reward rating. For more details about our Stock Ratings click here.

Leave a Reply

Your email address will not be published.