New Constructs CEO David Trainer appeared on CNBC's Closing Bell on Wednesday June 1, 2016 to discuss Nike (NKE) vs. Under Amour (UA) and which provides the better risk/reward.
HIDDEN GEMS:
1. Our discounted cash flow analysis shows that ACN’s current valuation (stock price of $48.59) implies that the company’s profits will decline by 9% and never grow again.
2. Economic earnings are higher than reported accounting earnings.
3. Excess cash of $3,728mm or about 12% of its market cap
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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.
HIDDEN GEM: Our detailed valuation model shows that MCD grew its “economic” profits more than it accounting profits during its last fiscal year. Economic profits rose by $272mm while accounting profits rose by $238mm. For details on what causes the difference between Economic Versus Accounting Profits, see Appendix 3 on page 10 of our free report on MCD.
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.
HIDDEN GEM: Our detailed valuation model shows that XLNX grew its "economic" profits by nearly $14mm during its last fiscal year while it reported an $18mm decline in accounting profits.
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.