The Impacts of Operating Leases Moving to the Balance Sheet
The Financial Accounting Standards Board (FASB) introduced a new accounting standard (ASU 2016-02) that requires companies to recognize operating lease assets and liabilities on the balance sheet.
Overstated Profits Can’t Even Justify this Stock’s Valuation
This firm’s lack of resources (relative to competitors) and low profitability make the expectations baked into the stock price look overly optimistic.
Don’t Buy What “Smart Money” Sells
Is the market hungry enough to justify the expected $7 billion valuation? Or, is this IPO how insiders sell stock and raise capital after the “smart money” (i.e. private equity, hedge funds, etc.) has dried up?
This David Stands Little Chance Against Industry Goliaths
As the market matures and competition firmly establishes itself, this firm’s lack of resources and highly negative margins create an uphill battle.
Competition Taking Market Share Could Sink This Stock
Risk of losing market share, when coupled with highly negative margins, unsustainable cash burn, and a soaring stock price mean this firm lands in the Danger Zone.
AI Has a Big (Data) Problem (3 of 5)
We are awash in an ocean of data that grows bigger by the second. And it’s a complete and utter mess.
The Market Doesn’t Appreciate This Tech Company’s Growth
Strong profit growth and a cheap valuation earn this stock a spot in January’s Most Attractive Stocks List and make it this week’s Long Idea.
No Recipe for Success: Low Margins in a Competitive Industry
This stock’s valuation has not adjusted to reflect new competitive pressures or the rapidly deteriorating fundamentals.
Failure to Adapt Dooms This Stock
This firm’s late transition to the cloud based software market has left it with falling profits, lagging margins, and a significantly overvalued stock.
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.
Danger Zone: Verint Systems (VRNT)
This firm has seen seen margins contract as early success brought more competition. To try and offset competitors taking market share, the firm made numerous shareholder value-destroying acquisitions. Now the stock is pricing in aggressively optimistic improvements in revenue growth and profit margins.
Danger Zone: Tableau Software (DATA)
This stock is on the upswing and is up 23% year-to-date, while the S&P is up just 6%. The fundamentals of the business don’t justify this price move. In fact, negative margins, strong competition, and the overvalued stock price land Tableau Software (DATA) in the Danger Zone this week.
Why Suitors Are Leaving Twitter at the Altar – Danger Zone
Today’s news that Alphabet, Apple, and Disney are unlikely to bid for Twitter should come as no surprise. We think these companies (and many investors) are doing the same work we have done and simply cannot stomach paying anywhere close to Twitter’s current price.
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.
Why Companies Overpay For Acquisitions
Overpriced acquisitions are far from a new phenomenon, but they’ve been especially prevalent in recent months. As a result, we’ve gathered some ideas about the various reasons companies ignore the evidence and continue to overpay for acquisitions.
Microsoft Vastly Overpays For LinkedIn
Our models show that, even with the most optimistic forecasts, over $20 billion, or $2.60 per MSFT share, of the $26.2 billion purchase is an overpayment and a direct destruction of value for MSFT shareholders.
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.
Danger Zone: Imperva Inc. (IMPV)
This week’s Danger Zone pick has since rebounded and might have investors thinking now is the time to buy. Unfortunately, the fundamentals of this company reveal a different story. Growing losses, misleading non-GAAP metrics, and significant competition land Imperva Inc. (IMPV) in the Danger Zone this week.
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: Blackbaud Inc. (BLKB)
Our call on Valeant (VRX) showed how dangerous it is to trust non-GAAP earnings because they cannot be used to cover true cash costs. For these reasons and more, Blackbaud Inc. (BLKB) lands in the Danger Zone this week.