I think of “war chest” as not just a ton of cash, but money set aside for strategic purposes, generally acquisitions. It wouldn’t sound quite right saying something like “we’re opening up the ol’ war chest to fund share repurchases!”
Why can’t companies deficit spend for their war effort. Just like the USG.
I find the tone quite submissive, like management is doing a big favor to them. The language is warped for sure. I doubt if some fellow analysts themselves understand one another. But i do know very senior analysts who are just plain and straightforward. The case above could be an example.
of course other analysts understand…
you pick it up pretty fast once you’re in the industry…
Oh they do, often under similarly false pretenses. High multiple acquisition predicated on synergies funded by debt? Shareholders receive stock wrapped in a crisply folded American flag.
Yes, after I posted that, I thought, “well, actually companies do float a lot of debt to engage in strategic operations like acquisitions.”
when i see the amount of money execs make on stock options, its incredible…its literally printing money out of thin air because investors don’t bother to be against such things…i would argue stock options and stock compensation as a whole should be severely limited…when a company can just print out stocks and make it worth millions, games start to be played…
It’s a huge turn off when execs try to push “adjusted pro forma” (wait, is that adjusted TWICE?) profit numbers. I’ll stick with GAAP you mugs, your stock comp is coming out of my pocket.
But my favorite metric of all time is EBITDARDCOGS. Why not just add everything back? Sales. That’s what matters. Companies be like, “More sales, less everything else, OHHH YEAH!”
Actually, all joking aside, the longer I do this, the more I am coming around to the fact that equity holders are widely loathed / disrepected and are considered basically the scum of the capital structure. Since the equity is the residual, it seems to be pretty okay for management to lie at every turn, especially if the company is leveraged. If they lie and the company goes tits up, well, that’s okay, the shareholders they lie to get wiped out, but management is never accountable because those shareholders just go away and are replaced by new shareholders when the debt is converted. Basically, the incentives are pretty messed up unless it’s a founder run company and he has significant equity.
I assume everyone is lying to me all the time unless proven otherwise. When dealing with management, that is the only prudent way to be. Even if they are basically good people, their incentive is to lie. Think about what it means when a stock is down a company has cash and can buy the shares – why do they want to tell me good news? It will increase the price of the stock and they will be able to buy less, and that may have an impact on the long-term value of their own holdings if they own stock.
It’s a dirty, dirty game.
The biggest frustration I have with these calls is that most of the questions follow the following pattern:
Analyst: ramble ramble specific question
Management: ramble ramble ramble “we’re very happy with results” ramble “we’re optimistic on the future” ramble (question not addressed) OR straight up “we don’t provide that information”
Analyst: Thanks that’s very helpful.
I’m constantly amazed by the patronizing analyst who thanks the management team for completely avoiding their question. Granted sometimes the questions are stupid and they ask things that management can’t comment on, but I wish they would follow up and force the question to be answered rather than the smug “that was helpful” reply like they actually got something out of that worthless response.
CTRL+H
Find Term=“EBITDARDCOGS”
Replace with=“Bullshit earnings”
Replace all.
That is absurd. Have you heard a company do that? I’ve heard EBITDA, which bothers me quite a bit (especially with the capital intensive stuff we usually look at) but never anything past that. Before R&D? Before COGS? Seriously?
Haha no one really does that, but they might say “proforma adjusted EBITDA” – dude, come on, let’s be real, your earnings are nowhere close to the number you just reported. My point is that if you’re going to add everything back, I might as well just look at sales.
i hate EBITDA…one of the analyst here tries to convince me when analyzing a mining/oil company that is all that matters…i don’t believe it
As an analyst I can confirm this a 1000 times over. One of the key reasons buyside even uses us is for management access. You make them look like fools on the call, well you can kiss that relationship goodbye. That doesn’t mean you have to always throw them softballs all the time though.
Now off the call is a different story; if all you do is throw them softballs, management will know you are the whipping boy and kinda loose some respect for you.
What do you guys see as the drawback to using EBITDA? Because to me it just seems like amortization is worthless and taxes are volatile and in the hands of politics. But I do the see significance of depreciation and interest.
Sometimes amortization expense seems unnecessary to gauge. Say a company makes an acquisition last year and is reporting higher amortization expense this year due to the acquired intangible assets. Maybe the acquiree had a higher amortization/ebit ratio so now the acquirer is suffering a lower operating margin due to the acquisition. And what if the intangibles were overvalued in the first place? And why bother accounting for the loss in value of assets such as customer relationships or trade names when the salvage value seems very low? I could understand there is value for large established brands, but it just seems like many companies carry intangibles that will have little selling value in the future.
For taxes, it also seems like some companies have inconsistent tax outflows. Like they are profitable for the year but instead of the paying the IRS they just record an accrued tax and pay it the year later. Then the next year the taxes are doubled.
Scenarios like these make me want to just use EBTA (why is this not more common?)
Saying thank you is being polite. Saying it was helpful when it really wasn’t is being a ki$$ a$$.
i posted this to the water cooler section but maybe it’s more fitting here – if you haven’t already, I think you’d enjoy a couple of awesome twitter feeds on the empty talk of analyst/management corporate-speak on calls:
Apparently my boss is feeling “dovish at the margin” today.
My personal gripe is people asking to “take things offline”
‘give some color’ tops the list in frequency.
I just say “Thanks, that was reaaallllly helpful. Tell it again” in a sarcastic and patronizing way…Owned.
I hate “it is what it is.” Although the geeky version of “x=x” occasionally generates laughs.