Investors who aren’t paying attention to the information disclosed in companies’ financial footnotes are increasingly in danger of losing some of their investment.
Hidden items lurking in the financial footnotes can dramatically impact a company’s yearly profitability.
The theoretical value of Enterprise Value is the total takeover value of the firm. And if that is the case, then all claims on cash flows need to be included. We go the extra mile with our diligence to ensure all claims are captured in our Enterprise Value formula.
For debt investors, which GAAP was primarily designed for, write-downs are analytically helpful. They provide a more accurate assessment of the liquidation value of a company’s assets. For equity investors, on the other hand, write-downs are not helpful because they distort the return on invested capital (ROIC) of a company.
Non-operating expenses are unusual charges that don’t appear on the income statement because they are bundled in other line items. Without careful footnotes research, investors would never know that these non-recurring expenses distort GAAP numbers by lowering operating earnings.
New Constructs rated MF Global (MF) a Dangerous stock long before it blew up.
2010 earnings for the retail apparel sector have been quite strong, especially compared to 2009. However, looking behind the window dressing of reported earnings, we find that not all earnings are made the same. Zumiez Inc. (ZUMZ), retailer of cool, new action apparel turned to an old accounting trick to boost its 2010 earnings by 13%
Sandridge Energy (SD) – Free Report, for Ask Matt Readers, Highlighting a Major Red Flag in the Footnotes
Here is our free report on Sandridge Energy for Ask Matt readers. Our analysis of the Financial Footnotes reveals a major RED FLAG: the company has written off over $3.4bn in assets in just the last two years.
Accounting data was not designed for equity investors, but for debt investors. “Earnings, earnings per share and earnings growth are misleading measures of corporate performance.”(from page 66 in The Quest For Value by Bennett Stewart, Harper Collins 1991.)
The United States Patent and Trademark Office awarded us patent #7,752,090, titled: System and Method For Reversing Accounting Distortions and Calculating A True Value of a Business.
New Constructs has a strong reputation on Wall Street and with individual investors. We have been recognized for our analytical rigor (options, hidden debt, write-offs, red flags) as well as the stock-picking benefits of our hard work and analysis.