August 26, 2010 – 9:39 am
RED FLAG: Our analysis of the Financial Footnotes reveals: the company has written off over $60bn in assets over the last twelve years. That is a big number compared to the company’s market cap of roughly $2.2bn and its net assets of about $1.3bn. This results in economic earnings of -$5,346mm compared to Net Income of -$866mm during the last fiscal year. For details on what causes the difference between Economic Versus Accounting Profits, see Appendix 3 on page 10 of our free report on JDSU.
August 24, 2010 – 8:30 am
RED FLAG: The main driver of the difference between Economic and Accounting earnings is FDX’s $11.9bn of off-balance sheet debt, a big number compared to $19.7bn in Net Assets and $25.6bn of market value.
By David Trainer
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Posted in Stock Picks and Pans
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Also tagged corporate profits, discounted cash flow model, downside risk, economic earnings, Financial Footnotes, Free Archive, free cash flow, NOPAT MARGIN, reward, risk, ROIC
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August 17, 2010 – 8:42 am
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.
By David Trainer
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Posted in Stock Picks and Pans
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Also tagged accounting, buy, cash flow, corporate profits, downside risk, dynamic discounted cash flow model, economic earnings, free cash flow, GAP, Invested Capital, Invested Capital Turns, NOPAT, NOPAT MARGIN, ROIC, stocks, upside potential, valuation
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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.)
By David Trainer
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Posted in Decoding Propaganda, Investing 101
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Also tagged accounting earnings, cash flow, corporate profits, dynamic discounted cash flow model, economic earnings, footnotes, GAAP, Invested Capital, NOPAT, propaganda, transparency
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Overall, the Risk/Reward of investing in Yahoo’s stock looks Very Dangerous to me. There is lots of downside risk given the Misleading Earnings and there is little upside reward given the already-rich expectations embedded in the stock price.
By David Trainer
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Posted in Stock Picks and Pans
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Also tagged cash flow, corporate profits, downside risk, dynamic discounted cash flow model, expecations, GAAP, Invested Capital, investing, investment decision, investment strategy, risk, upside potential, valuation
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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.
By David Trainer
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Posted in Stock Picks and Pans
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Also tagged Competitive Advantage Period, discounted cash flow model, EVA, free cash flow, Growth Appreciation Period, Invested Capital, Invested Capital Turns, NOPAT, NOPAT MARGIN, return on invested capital, ROIC, WACC, Weighted Average Cost of Capital
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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.
By David Trainer
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Posted in Stock Picks and Pans
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Also tagged assets, cash flow, corporate profits, downside risk, expecations, finance, Free Archive, GAAP, Invested Capital, Invested Capital Turns, investing, investment strategy, NOPAT, NOPAT MARGIN, reward, risk, ROIC, stocks, upside potential, valuation, Wall Street
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TheStreet.com recently published three articles quoting me on SIRI. Andrea Tse called and, after reviewing our models on SIRI, I told her that the stock was Dangerous because:
By David Trainer
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Posted in Stock Picks and Pans
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Also tagged cash flow, corporate profits, discounted cash flow model, downside risk, dynamic discounted cash flow model, expecations, GAAP, investing, investment decision, investment strategy, value, Wall Street
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There are two primary reasons a stock gets on our Most Dangerous List:
1. Misleading earnings: reported GAAP earnings are positive and rising while economic earnings are negative and declining
2. Expensive valuation: future cash flow expectations embedded in the current price are unusually high especially compared to historical performance.
Free copy of our report on NYX is in the Free Archive on www.newconstructs.com. Or just click here: NYX Company Valuation Report.
If you are interested in learning how to uncover the truth about the profitability and valuation of stocks, the first… Read more >>
By David Trainer
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Posted in Investing 101
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Also tagged assets, cash flow, database, diligence, discounted cash flow model, finance, GAAP, Invested Capital, NOPAT, NOPAT MARGIN, Proof Is In Performance, propaganda
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