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Profits are hugely volatile due to weird accounting rules (e.g. if a company holds a publicly traded subsidiary, and that sub's price drops in the quarter, all
by metacritic12 4y ago
Profits are hugely volatile due to weird accounting rules (e.g. if a company holds a publicly traded subsidiary, and that sub's price drops in the quarter, all the capital loss is counted immediately as negative for "net profit" now, IIRC due to recent accounting changes).
Better proxy to look at top line if you want a really rough picture of overall health.
Otherwise, you need to make meticulous adjustments to bottom line, justify those adjustments, and only then do you do a bit better than top line.
- anikom15 4y agoIf a company’s asset goes down, why shouldn’t that be considered a loss? There doesn’t seem to be anything weird about that. Am I misunderstanding the reporting?
- pb7 4y agoLarge companies have a ton of “cash” — but it’s not really cash, it’s parked in equities of other companies. If the whole market goes down and those equities are worth less, yes, the company is less valuable overall so market cap should be lowered but is it indicative of the company’s success as a business?
- anikom15 4y agoI would say so, because part of a company’s business is choosing what to invest its cash in. If a company is making bad investments (or viewed as bad in the current market), then that should reflect in its price, and reporting that information helps catalyze that.
- colinmhayes 4y agothe idea is the securities they hold has nothing to do with their actual business or cash flow.