03-21-2016, 04:45 PM
I usually use GAAP numbers when looking at a company. Even use it with T as I know there's a big depreciation/amortization component built in there. If I get a little nervous, I take a quick calculation of free cash flow and I feel better.
If you think about it, the whole purpose of GAAP is to provide a uniform way of reporting earnings and to account for everything that's involved in running a business. Sure, depreciation, amortization & impairments are non-cash expenses. We talked a lot about it over in this thread but even Buffet has warned that you can't just ignore them when valuing a company. It's capital that's already been spent by the business so it's not there to invest in anything else.
The only time I intentionally adjusted for some income/expense was when CMP received a large insurance settlement in 2012 or 2013 for an event (tornado) that was two years old and unlikely to happen again. The amount was too big to ignore in relation to their overall revenue and I excluded it to see how the business was doing.
Currency issues? I get a kick out their adjusting for them. 9 times out of 10, it's stuck in a "bank" outside of the country so it's not available for them to do things like pay me dividends anyway.
Hopefully they use it to support their foreign operations so no "home" currency is needed.
If you think about it, the whole purpose of GAAP is to provide a uniform way of reporting earnings and to account for everything that's involved in running a business. Sure, depreciation, amortization & impairments are non-cash expenses. We talked a lot about it over in this thread but even Buffet has warned that you can't just ignore them when valuing a company. It's capital that's already been spent by the business so it's not there to invest in anything else.
The only time I intentionally adjusted for some income/expense was when CMP received a large insurance settlement in 2012 or 2013 for an event (tornado) that was two years old and unlikely to happen again. The amount was too big to ignore in relation to their overall revenue and I excluded it to see how the business was doing.
Currency issues? I get a kick out their adjusting for them. 9 times out of 10, it's stuck in a "bank" outside of the country so it's not available for them to do things like pay me dividends anyway.
Hopefully they use it to support their foreign operations so no "home" currency is needed.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan