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

forms of income or expense, but only that they should not be in-

cluded in an analysis of long-term growth.

A reasonable premise is that any analysis you perform for the

purpose of identifying stocks is more accurate if based on realistic

numbers. Returning for the moment to the analogy of a personal

loan application, your banker would expect you to provide a realis-

tic summary of your income. If you had recently sold a boat and in-

cluded the proceeds as “annual income,” the loan officer would

remove it, knowing that the proceeds are not part of your recurring

annual salary. By the same reasoning, adjusting reported results of op-

erations is intended ...