Stock Profits: Getting to the Core—New Fundamentals for a New Age

as well. Actual reform to GAAP may take many years, but analysts

and financial planners need to be able to apply those adjustments to

today’s numbers in order to compare corporate value in real terms.

Applying the Core Earnings Idea

When you begin to critically review a company as a potential in-

vestment, one of the first things you check is the results of opera-

tions—revenues and earnings. Of course, you assume that the

numbers themselves are accurate. But what if those numbers are in-

flated because they include nonoperational or one-time items? What

if those numbers exclude significant expenses that, if disclosed, would

drastically change your view ...