Showing posts with label MarketWatch. Show all posts
Showing posts with label MarketWatch. Show all posts

Saturday, 16 May 2015

NYSE & NASDAQ: what are GAAP and non-GAAP profits?

As a newbie in the US stock market, a first sight at a financial report will often baffle at "GAAP profit" and "non-GAAP profit". What are they?

To start with, Yahoo finance offers a very convenient avenue of looking at the earning release of listed companies in the US. The date and time of the release of the fiscal report are clearly stated (as opposed to KLSE in which you really don't know when will it be released but within 2 months from the quarter end).

For example, this is the Q1 earning of TESLA (NASDAQ: TSLA). 8-K form is the name of form that contains financial results.

TESLA 2015 Q1 Earnings

GAAP stands for Generally Accepted Accounting Principles. It is the standard norms of how companies should present their earnings in NYSE and NASDAQ. In a simple way, what we see on the balance sheet is based on the GAAP profit, i.e. the common way of reporting profit.

However, a company may write-down an asset or restructure its organisation. These actions usually come with large one-time cost that may not be truly reflected in the GAAP profit. As such, a company will also provide “adjusted” earning figures that excludes these nonrecurring items. These effect, usually is one-off, will be regarded in the non-GAAP profit. And because of this, I personally think that it will more accurately reflects the company's performance.

The balance sheet of TESLA:



We see that a GAAP net loss -$ 154 M or $-1.22/share was incurred according to the conventional way of account reporting. After considering compensation expense, non-cash interest expense and deferred profit, its actual net loss is only -$ 45 M or $ 0.36/share, which is significantly less than the GAAP standard way of reporting.

The above exemplifies the use of non-GAAP reporting to account for a more accurate earning which truly reflects the company's performance. There are good and bad with both measures of reporting in the sense that the report could be manipulated to favour the desired outcome. Which one to look at is then completely up to your discretion.

Saturday, 14 June 2014

NYSE: AMD analysis

AMD shares closed with 2 white candles with relatively high volume on 10 and 11 June. On these two days, there is no apparent reasons why the shares moved with volume. One day later, the news revealed.

Headline: AMD reorganizes (MarketWatch) which states the plan of the company to consolidate some of its business segments and appointed a new chief operating officer. Another news concerns about its rival, Intel (INTC) which loses appeal against record $1.43 billion EU fine (MarketWatch). I think AMD didn't earn any money from this, but morally, is a good news that push AMD share.

On 12 June, the share opened higher @ 4.33, trading high @ 4.44, but closed @ 4.29. A newbie technical chart:


The share has just broken its upper Bollinger Band (BB), with volume. This is a good sign for the share price. A black candle on 12 Jun, could it be a "washing" process? Not sure, still fumbling in US markets. Let's see what happens in the next few weeks.

Back in 2006, AMD bought over ATI (Engadget), a big move by the company at that time. Since then, the company has shaped its future direction, to combine a CPU with graphics technology into one single chip, known as APU (Accelerated Processing Unit). I like this idea. By now, more and more APUs are being installed on laptops, easily observed when you walk into a computer shop. In gaming console areas, XBox One is using AMD APUs too. You can find chips made by AMD in personal computers, tablets, game consoles and cloud servers as well.


If the direction of APU is right, it could be very rewarding in years to come.