ISS Buying EVA Dimensions Signals More Focus on Fundamental Research
Sophisticated investors want metrics that go deeper than reported earnings so they can get a truer picture of cash flows and hold companies accountable for capital allocation.
Understated Earnings Create Opportunity in These Stocks
We found five stocks with rising economic earnings that the market might have overlooked due to declining GAAP earnings.
ICYMI: New Long Idea, Barron’s Feature, Harvard B-School Feature, More Red Flags from New 10-Ks, Position Updates & Warning on ‘Earnings’ Season
Here’s what happened at New Constructs this past week.
Only One Sector Has Experienced A True Earnings Recovery
Accounting earnings may have rebounded from 2015 lows, but economic earnings—which reverse accounting distortions and account for the weighted average cost of capital (WACC)—remain in a persistent downturn.
Invested Capital Turns: Explanation and Examples
Invested capital turns are an important consideration in the analysis of return on invested capital (ROIC) and a key measure of balance sheet efficiency.
New Stocks in September’s Exec Comp Aligned with ROIC Model Portfolio
The best performing stock in last month’s portfolio was Children’s Place (PLCE) which was up 15%. Get a free look at a new stock in September’s Model Portfolio.
Taking GAAP Earnings at Face Value Puts Investors at Risk
The more investors understand about how GAAP net income omits valuable information, the better equipped they are to find truly hidden gems, or those companies with growing economic earnings and undervalued stock prices.
Alpha-generating Forensic Accounting Examples
New Constructs’ proprietary forensic accounting research empowers investors to identify alpha-generating investment ideas more efficiently than traditional manual approaches. This report highlights investment ideas based on insights our research technology automatically provides on a firm’s true return on invested capital (ROIC) and economic earnings.
The Earnings Recovery Remains an Illusion
Our analysis of the latest 10-K and 10-Q filings for the S&P 500 shows that the GAAP earnings growth in the market has not translated to an increase in economic earnings.
Value Investing Is Not Dead, But It Is Harder
We think today’s market is the best in many years for value investors, the real value investors, that is. The real value investors analyze footnotes and balance sheets in addition to income statements.
Webinar: “New Age” Analysis – Equity and Fixed Income Research Synergies
Looking for forensic accounting diligence in footnotes and other disclosures to improve risk management? Get answers to this topic and more from New Constructs and Viola Risk Advisors’ co-hosted webinar.
The Earnings Recovery Is A Sham
Our analysis of the latest 10-K filings for the 2,600 largest and most actively-traded companies shows that the much-hyped end to the earnings recession is an accounting illusion.
Filing Season Finds: Wednesday, February 22
Yesterday, our analysts parsed 56 filings and collected 7,941 data points. In total, they made 1,335 adjustments with a dollar value of $351 billion. In particular, analyst Hunter Gray found an unusual item in Phillips 66’s (PSX) 10-K.
“This is the earnings metric stock-market investors should focus on”
On Wednesday ( 10/12/16) our op-ed article was published at Marketwatch. The article explains why investors need to look past common metrics such as EPS or non-GAAP earnings
Danger Zone: Zoe’s Kitchen (ZOES)
Declining economic earnings, weak competitive position, and an overvalued stock land Zoe’s Kitchen (ZOES) in the Danger Zone this week.
Danger Zone: 8×8 (EGHT)
This week’s Danger Zone is a company that claims consistent profitability and continued success, despite years of shareholder value destruction. Misleading non-GAAP results, large losses, and an overvalued stock price land 8×8 in the Danger Zone.
Danger Zone: Interactive Intelligence (ININ)
But what happens when a once profitable company makes the transition to the cloud and has become largely unprofitable? That company, Interactive Intelligence (ININ) is in the Danger Zone this week.
The SEC Is Starting To Worry About Non-GAAP Earnings
We’ve been sounding the alarm on non-GAAP earnings for several years now. Companies exploited the wide leeway granted by the SEC to present their business in a more favorable light.
Economic Earnings: Explanation & Examples
To derive economic earnings, 30+ adjustments must be made to accounting earnings. These adjustments remove items hidden in the footnotes and MD&A of annual filings and close loopholes within GAAP accounting.
Danger Zone: Compensation Committees
We know that Valeant is not the only company with misaligned executive incentives. There are many others, many of which have already been put in the Danger Zone and some who will go into the Danger Zone soon. This week, however, compensation committees land in the Danger Zone because of the role they play in creating the problems that lead to shareholder value destruction.