Re: [CANSLIM] Re:Cash Flow

From: Spencer48@aol.com
Subject: Re: [CANSLIM] Re:Cash Flow
Date: Wed, 13 Feb 2002 14:20:14 EST

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Katherine:

     Thanks for the reply, but as I understand it "pro forma" earnings are 
the total earnings with one time expenses or earnings deducted from the total 
income statement earnings.  

     Thus, the income statement bottom line could be higher or lower 
depending on whether the one-time expenses outweighs the one-time income flow.

     In any event, IBD had an interesting and appropos article in Investors 
Corner yesterday.  Here is what I C&Ped:  
 
"Investor's Corner, Tuesday, February 12, 2002, EPS Rating Helps You Gauge 
Profits, BY CHRISTINA WISE:
A company's earnings figures are arguably the most telling indicators of its 
fiscal health. 
But there are nearly as many flavors of earnings as there are of Kool-Aid . 
These include EBITDA, diluted earnings and pro forma earnings.
Let's start with the 1) plain old vanilla style of earnings per share. 
They're calculated by dividing a company's total after-tax profit by the 
number of its common shares outstanding.
2) Diluted earnings per share, on the other hand, adds a firm's preferred 
stock, unexercised stock options and convertible debt to the number of common 
shares in order to figure the divisor. 
Many companies also report 3) pro forma earnings. In theory, these figures 
exclude so-called one-time items, typically things like merger and 
restructuring costs and noncash items. 
The idea is that leaving these out gives investors a better picture of a 
firm's true income because these one-time expenses or income gains don't 
reflect its ability to earn money in the future. 
The trouble is that it's pretty much up to the companies themselves as to 
what qualifies as a one-time item-either of income or expenses. So the 
resulting figures are open to manipulation.
One-time items and pro forma statements can also create problems on the 
earnings side of the fence. Last month the SEC, in its first-ever pro forma 
financial reporting case, filed suit against Trump Hotels & Casino Resorts 
(DJT for posting pro forma earnings figures that included a one-time gain, 
without saying it was a one-time gain.
4) EBITDA figures can also leave investors perplexed. The acronym stands for 
Earnings Before Interest, Taxes, Depreciation and Amortization. It shows you 
how much money the firm made before accounting for these items. 
Confused? If you want to see a firm's [For] real earnings with all the spin 
stripped away, check out the earnings it reports to the SEC in its Form 10-Q 
and 10-K.   These have to adhere to Generally Accepted Accounting Principles 
(GAAP). The numbers also can usually be found in the firm's earnings press 
release on their investor relations Web site. Another way to cut through all 
the figures is a stock's Earnings Per Share Rating. The 1-to-99 score shows 
you how it stacks up against the market in terms of quarterly and annual 
growth. IBD uses a form of pro forma earnings to calculate EPS changes.  
Focus on stocks whose EPS grew at least 25% in the latest quarter and 30% on 
an annual basis. These stocks have the best potential for gains."

jans




In a message dated 2/13/2002 1:23:19 PM Eastern Standard Time, 
kmalm@earthlink.net writes:

<< Hi jans,
 
 Just a cautionary note. If you are looking at DGO earnings numbers, remember 
that they are *proforma* earnings. That means that certain one time items my 
be added back to the GAAP earnings. The other thing to be careful about is to 
make sure that you're comparing apples to apples. The cash flow figures can 
be stated in terms of the fiscal year or the trailing twelve months. (TTM). 
Make sure you're looking at cash flow and EPS from the same periods.
  >>

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