Earnings and Valuation Distortions, Part 1

Business_Finance_14080On May 29th, in his well written Financial Analysis and Commentary column, John Janarone of the Wall Street Journal discussed the variability of depreciation expense and the outlook for earnings, for various retailers, such as PetSmart (PETM), Best Buy (BBY), Barnes and Noble (BKS), among others. It highlighted a mature retailer, PetSmart, and the premise of the article was that valuation measures may make stocks look artificially expensive, as companies cut back on expansion and eventually depreciation expense falls.

The article points out correctly that retail (including restaurants) are way overbuilt in the US and slow up is needed.

To us, the article once again highlights the faculty metric and displays the limitations upon focusing on short-term company GAAP earnings trends.

About John Gordon

John A. Gordon is a restaurant sector expert, who focuses on restaurant management, operations, and related earnings and economics matters. He consults with attorneys and other professionals who need to know about restaurants, via expert research, expert consultant and expert witness roles. Working for both plaintiffs and defendants, he has experience with both state and federal actions. He is an expert on chain restaurant business conditions and publicly traded companies. Gordon has extensive, career-long executive restaurant operations, corporate staff, financial management and management consulting experience, and is familiar with virtually all management issues and business disciplines. He has completed PSLRA securities, financial projections, due diligence reviews, earnings and damages, franchisee/franchisor matters, wage and hour and menu analysis expert work. Expert witness and article contributor for www.ForensisGroup.com

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