GAAP vs. non-GAAP revenue question

[viciam]

Hi all,

I'm teaching myself how to analyse financial statements and I have a question.

I need your help in understanding please.

I'm reading the Earning transcript calls from Sunpower (SPWR) which you can see here

http://seekingalpha.com/article/558...sses-q1-2012-results-earnings-call-transcript

Now the CEO is mentioning non gaap revenues and profits from Q1 2012

Now I'm reading an analysis by Reuters which states that there is a loss of 74 million which can be seen at

http://www.reuters.com/article/2012/05/03/us-sunpower-idUSBRE8421C220120503

Can someone with knowledge about this please explain to me what is going on? Is the CEO using non gaap to make the situation of the company look better than it is?

What I gather is that Non gaap loss per share is $0.12 and Gaap loss per share is $0.67 with 112 million shares outstanding. So Non Gaap loss is $13million and GaaP loss is £74 million. That's a huge difference. So what are they hoping to achieve by focusing a lot on Non Gaap numbers rather than the Gaap numbers. Which one as an investor should I pay more attention to?

It would be great if someone could give me the answers for all the questions I have. It would be kind of you.

Thanks in advance

 

[McLovin]

Non-GAAP is the same as what is often shown in Australia as "underlying earnings". So for instance, one off items would be removed. Also things like EBITDA, cash earnings etc are considered non-GAAP.

 

[viciam]

Hi, thanks for the reply

Can anyone else elaborate further on my questions please

 

[burglar]

Hi, thanks for the reply

Can anyone else elaborate further on my questions please

I googled this and found:

http://www.pennystocksweekly.com/basics_2_14_2011_gaap_versus_non_gaap.html

I am none the wiser!

Are you in America? Just curious!

 

[viciam]

I googled this and found:

http://www.pennystocksweekly.com/basics_2_14_2011_gaap_versus_non_gaap.html

I am none the wiser!

Are you in America? Just curious!

Hi, thanks for the link

I'm in the UK

 

[McLovin]

Hi, thanks for the reply

Can anyone else elaborate further on my questions please

The Seeking Alpha link you provided with the CEO's commentary explains the difference.

There's so many variables as to which you should pay more attention to. It's no different to asking whether you should use EBIT, EBITDA, NPAT or underlying profit. You need to understand the company to decide which is the most appropriate. And of course the CEO will attempt to use the most flattering set of numbers.

 

[burglar]

Hi, thanks for the link

I'm in the UK

Hi viciam,
Welcome to ASF
I find it a little strange that you come to an Australian Stock Forum to discuss shares on the NYSE.
That is why I asked if you were in America.
To the best of my knowledge, very few Australians invest on the NYSE.

Read all you can about that company before you buy!
Don't believe everything you read!
Keep up with their activities after you buy!

I can't help you much but I wish you good luck!

 

[viciam]

Hi, Thanks for the reply guys,

Burglar I can't find any other good investing forums and ASF has fast replies

 

[doctorj]

Personally, I'm very skeptical of any number reported by management that isn't IFRS-compliant (or US/UK GAAP). I'm sure there are specific situations where a number prepared in another way makes sense to help assess a company, but the number of times where its subsequently gone wrong for investors makes it a red flag for me.

Accounting standards exist for a reason. They don't always make sense, and in a one-size-fits-all solution there will always be winners and losers but as dividends to shareholders are usually limited by IFRS retained profits, it doesn't help much for shareholders anyway.

Having said that, Market Consistent Embedded Value used by many life insurers is generally OK, despite not being very market consistent at all.

 

[viciam]

Personally, I'm very skeptical of any number reported by management that isn't IFRS-compliant (or US/UK GAAP). I'm sure there are specific situations where a number prepared in another way makes sense to help assess a company, but the number of times where its subsequently gone wrong for investors makes it a red flag for me.

Accounting standards exist for a reason. They don't always make sense, and in a one-size-fits-all solution there will always be winners and losers but as dividends to shareholders are usually limited by IFRS retained profits, it doesn't help much for shareholders anyway.

Having said that, Market Consistent Embedded Value used by many life insurers is generally OK, despite not being very market consistent at all.

Thats what I am thinking also, I mean there is a huge difference in the GAAP eps and Non GAAP eps.

I suppose what I've learnt about it is that some times you need NON GAAP to assess a company whilst discounting certain aspects such as ammortization etc. But my feeling is that amortization and other things left out in NON GAAP are crucial and very real factors that effect the business and future growth.

To leave them out is like deciding on which car to buy but not taking into account petrol consumption

 

[burglar]

...

I'm reading the Earning transcript calls from Sunpower (SPWR) which you can see here

http://seekingalpha.com/article/558...sses-q1-2012-results-earnings-call-transcript

...

http://seekingalpha.com/article/721871-5-solar-stocks-that-will-sink-further-by-2013?source=yahoo

 

[viciam]

Burglar I wouldnt pay any attention to motleyfool. Sometimes they Just released an analysis yesterday of sunpower where they said it is the perfect stock, they can't make up there mind so I decided to stop paying attention to mass analysis reports who care not about investors but only to create reading content to send out to their subscribers in order to grow more. Hiwever occassionly theres value to be found in their articles

 

[burglar]

Burglar I wouldnt pay any attention to motleyfool. Sometimes they Just released an analysis yesterday of sunpower where they said it is the perfect stock, they can't make up there mind so I decided to stop paying attention to mass analysis reports who care not about investors but only to create reading content to send out to their subscribers in order to grow more. Hiwever occassionly theres value to be found in their articles

Now there is a valuable lesson you have learnt.

And here is one that I have learnt:

“The stock market by its very nature is designed for you to lose money. The rallies and reactions within any trend ensure this process is at work constantly. It is created automatically. The market behaves this way because it has to! The weak have to perish so that the strong can survive. Professional traders are fully aware of the weaknesses in traders under stress and will capitalise on this at every opportunity.”

“Master the Markets”, Tom Williams
You can download his PDF book (if you are emotionally ready)
http://www.tradeguider.com/mtm_251058.pdf

 

[burglar]

... they can't make up there mind ...

YES, they can and did make up their mind.
They chose to lump this company with the bad ones...
the price went down 3.6%
They then chose to talk it up again ...
Will I need to check their price today??