I suspect FactSet also includes the mark to market revaluation of equity stakes held by GOOG and AMZN in their definition of net profit, which just exacerbates the issue. Normally, wouldn't move the needle, but given we're talking about tens of billions here...
GAAP has been broken for some time now, IMHO. Don't get me started on how amortization of acquired intangibles distorts economic reality (cf. Topicus, although that requires even more adjustment.)
These days, I tend to just start with cash from operations, clean it up for anything nonsensical, and then deduct an estimate of maintenance capex (which I tend to guesstimate between depreciation and capex, with reference to an estimate of remaining useful life to try and calibrate it) to get to a cash "owner's earnings" number.
I suspect FactSet also includes the mark to market revaluation of equity stakes held by GOOG and AMZN in their definition of net profit, which just exacerbates the issue. Normally, wouldn't move the needle, but given we're talking about tens of billions here...
Yes, very good point
GAAP accounting is troublesome for equity investors
It produces very misleading output
Now, more than ever, significant adjustments are needed when investors are processing raw GAAP numbers
I fear that there is a great deal of mispricing happening in the market at the moment. It makes the market more fragile than it should be
GAAP has been broken for some time now, IMHO. Don't get me started on how amortization of acquired intangibles distorts economic reality (cf. Topicus, although that requires even more adjustment.)
These days, I tend to just start with cash from operations, clean it up for anything nonsensical, and then deduct an estimate of maintenance capex (which I tend to guesstimate between depreciation and capex, with reference to an estimate of remaining useful life to try and calibrate it) to get to a cash "owner's earnings" number.
We all do the same thing
It's amazing a company hasn't been established offering 'cleaned up' financial data for investors
Maybe an opportunity?!?
Spot on!