Hi all, maybe one of you could help me.
I want to contribute to this discussion group but I want to do it properly.
I looked at several 10Q for several companies trying to find adjusted EPS and not regular GAAP EPS in the reports. I couldn’t find it.
Am I missing something?
Can someone point me to how one gets it for the 10Q and the 10K.
I believe this short guide should be put to the knowledge base.
Thanks and Happy New Year all!
The easiest and fastest way to find them is in the press release, not the SEC forms. I’m pretty sure that is in the knowledge base.
I looked at several 10Q for several companies trying to find adjusted EPS and not regular GAAP EPS in the reports. I couldn’t find it.
Hi shukisasson,
The 10Q and 10K are reports that they make to the SEC so since they are government reports they have to include just the GAAP. The way to find non-GAAP, or adjusted, earnings is to look at the earnings press releases. Note that for some companies the adjusted and GAAP earnings will be the same or only differ trivially.
If you are still having difficulty with a particular company you can calculate an approximation of adjusted earnings by looking at the sec reports and scroll down until you see their stock based compensation, add that to net income, figure the percent income tax that they have used, and subtract that percent from the new net income, and divide by the number of shares. It’s easier if you can just find it in the press release. Stock based compensation is the most common reason for adjusted earnings.
If a company has NOL’s released, or repricing of warrants, or the sale of a building, or something like that that, they really should make that clear in the press release, and you shouldn’t have to search for those in the sec reports.
Best,
Saul
Shukisasson:
I looked at several 10Q for several companies trying to find adjusted EPS and not regular GAAP EPS in the reports. I couldn’t find it.
Am I missing something?
Can someone point me to how one gets it for the 10Q and the 10K.
Please look in the Knowledge base that Saul has been kind enough to put together. He goes over it in detail. Here is the link, and it is on the right side of the screen in “unthreaded” mode.
http://discussion.fool.com/our-new-improved-knowledgebase-ed-2-j…
Brian
Hi Saul, thanks for the clarifications. Yes with SWKS they are reporting the non GAAP earnings in their press release:
Example:
http://investors.skyworksinc.com/releasedetail.cfm?ReleaseID…
just look for GAAP and choose the non GAAP earnings.
IPGP however reports only the GAAP earnings in their press release:
http://investor.ipgphotonics.com/releasedetail.cfm?ReleaseID…
I suspect that this is the norm for all their press releases.
Do you give up on it at this point? Or do you proceed for the calculation you detailed. (For two years that may take some time but if this is what needs to be done we’ll do it.)
I assume that doing the work is the right approach…
Thanks,
Shuki
IPGP however reports only the GAAP earnings in their press release:
Hi Shuki,
I clicked on the link you provided and got their press release. I scrolled down past the text and you come to the first table called Consolidated Statement of Income (that’s the usual one where they give revenue, expenses, net income taxes and earnings per share) and just below that was Supplemental Table of Stock-Based Compensation. Couldn’t be more convenient. I decided to see how long it would take to get their adjusted earnings.
On the first table:
Income before taxes $89.7
Taxes $28.9
I divided 28.9 by 89.7 and discovered they are paying a 30% tax rate.
On the second table:
Total Stock based Compensation $3.5
Adding Income before taxes (89.7) and St B comp (3.5) and I get $93.2 as new Net Income before taxes.
Now 70% of that (or 65.2) will be net income after taxes.
Divided by number of diluted shares or 53.4 gives me $1.22 per share (up from $1.18 GAAP).
That took me two and a half minutes with my little pocket calculator. Note I rounded everything off for simplicity. It took me a lot longer than that to write it up for you afterward.
Note that the table under that shows Acquisition Related Costs and has amortization of intangible assets. They put that little table there because they know that people usually would add that back that too in figuring adjusted earnings. I didn’t bother with it though since in this case the amount was trivial (0.4), and 70% of that would be 0.3 which only changes things by a half a penny or so. But that gives you an idea.
Best
Saul
Saul. THANK YOU! For taking the time to reply so clearly to a specific concept, in a specific thread. I know that you’ve clearly described GAAP and your thoughts about it, in the knowledge base… But seeing these examples REALLY helps me to better understand.
Ralph
That took me two and a half minutes with my little pocket calculator. Note I rounded everything off for simplicity. It took me a lot longer than that to write it up for you afterward.
Hi Saul, once again thanks for the explanation. I suggest that this very same example should be put to the knowledge base.
That will make things much clearer to new comers to this discussion group.
Maybe it looks trivial to you. To me this wasn’t as straight forward.
Me personally, I will book mark this post as a future reference for myself. Next analysis I’ll make I’ll use this guide to calculate the adjusted EPS.
Thanks again!
Shuki
Taxes $28.9
I divided 28.9 by 89.7 and discovered they are paying a 30% tax rate.
Just a quick note to point out a typo in Saul’s post if anyone’s confused. Taxes were 26.9, not 28.9. It’s clear Saul used the correct figure when doing the calculation, since 26.9 ÷ 89.6 = 30%.
banjr
The press releases are fine, and good enough for initial analysis–and good enough for the long haul too–but with one caveat: The annual report will have a description of the adjustments a company makes to derive their non-GAAP numbers and an explanation of why the company believes that this method better describes the company’s performance. Before ramping up the investment percentage, one would of course read that and decide for yourself if those adjustments are valid.
KC
I have seen most companies follow one or the other model.
Emphasize on non-GAAP or adjusted EPS - these are growing businesses or acquisitive companies.
Just state GAAP results - genreally these are companies not fast growing and / or doesn’t need to separate non-recurring expenses which are not big part of the equation.
So this board being rapid growth focused, we come across few GAAP only results companies and for me, in those cases, I would just use GAAP results.