HIDDEN GEM: Our detailed valuation model shows that IBM grew its “economic” profits more than it accounting profits during its last fiscal year. Economic profits rose by $1.15bn while accounting profits rose by $1.09bn.
One of the Most Dangerous Stocks for July, Whole Foods has misleading earnings and a sky-high valuation, in our opinion. The same is true for all of our Most Dangerous Stocks.
Hidden Gem – GPS: economic earnings are rising faster than reported accounting earnings b/c the company lowered the capital employed to run the business. GAAP earnings do not capture increase capital efficiency of the business.