Those of you who work in ER , do you guys have models in both GAAP and non-GAAP numbers ? At work,my Analyst’s models only have non-GAAP numbers but he also includes reconciliation to the GAAP numbers on the same sheet. However, I am sending out some sample models which I have built on my own to prospective employers that only have GAAP numbers since I created these models from the 10-Q/K and not the press release. Would that be considered a negative ? My aim for these models is to demonstrate my modeling skills and understanding of the financial statements.Hence , I think not including the non-GAAP numbers should not be a big deal. Please advise.
I suppose when you say “financial modelling skills and understanding of financial statements” you’re referring to the fact you know how to use a spreadsheet and link cells. most ppl use EBITDA, adjusted return on equity, adjusted book to value a firm. GAAP should almost always never be taken at face value. the decision to use gaap or non gaap is a demonstration of your understanding of the business and what is a more appropriate measure of the businesses’ underlying fundamentals. make adjustments where necessary.
I first take a look at operating earnings. It helps me understand the core business fundamentals. This is a non-GAAP concept. I, then, look at below the line items to see to what extent company is destroying value, if at all.
Given the decline in equity values last year, a lot of companies had to write down goodwill, which most likely significantly impacted operating and EPS results. It would look weird to see a company with quarterly earnings of $0.15, $0.22, -$5.12, $0.18. Just one example of why you should show historical Non-GAAP. Also, it just seems lazy not doing it.
You should show non-gaap and gaap in your models for reconcilliation Show that you know how to adjust for extraordinary items (and do tax-adjustments, pre-tax out of op. expenses, after-tax in extraordinary line, difference added back to tax line). Like Nibilita said, its lazy to leave it out.