QUALITY OF EARNINGS: The Investor's Guide to How Much Money a Company Is Really Making by Thornton L. with Robert Sobel O'glove

QUALITY OF EARNINGS: The Investor's Guide to How Much Money a Company Is Really Making

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KIRKUS REVIEW

A genuinely innovative and practicable approach to securities analysis that can help industrious do-it-yourself investors minimize their downside risks. Much of what passes for research on Wall Street is actually reportage, since many brokerage-house and institutional analysts take at face value the figures released by portfolio companies. By contrast, O'glove casts a cold eye on corporate income statements and balance sheets, publishing his typically against-the-grain findings on widely held stocks in an advisory service called the Quality of Earnings Report. As the author makes clear, identifying danger signals can be a difficult business: generally accepted accounting procedures leave plenty of room for judgment calls. Breaking a tough job down into easy steps, O'glove delivers instructive counsel on obtaining as well as interpreting definitive data. Almost invariably, he observes, detailed SEC filings (like 10Ks and 10Qs) are preferable to the sunny-side-up reports prepared for shareholder consumption. Among other things, the author recommends tracking accounts receivable, overhead expenses, and inventories; buildups of any substantive magnitude may mean trouble ahead. Also audited are the importance of accounting changes (in particular those that enhance reported performance), cash flow, coverage ratios, debt service, extraordinary (or non-operating) income, tax rates, and write-offs. Throughout the text, which incorporates a wealth of tabular material, O'glove uses excerpts from his advisory service that name names and afford object lessons on key points. He concedes that his methods are not yet infallible. Nonetheless, even a short list of his recorded alerts--on, for example, Baldwin United, Commodore International, Varian Associates, and Wang Labs--is impressive. The bottom line: a blue-chip reference that, without ever overstating its case, provides savvy, self-reliant investors the tools with which to double-check the bullish bias of the equities market.

Pub Date: March 1st, 1987
Publisher: Free Press/Macmillan