Posts by: WST Expert 1
Re: Other income
Correct. You have to read the footnotes (usually Footnote #1 for Accounting Principles) to see what's in Other Income respectively. In WMT's case, Other Income in Revenue is Sam's Club Membership Fee Revenue, so totally belongs under Revenue category. Never base a decision solely on the label, you H... Read More
Correct. You have to read the footnotes (usually Footnote #1 for Accounting Principles) to see what's in Other Income respectively. In WMT's case, Other Income in Revenue is Sam's Club Membership Fee Revenue, so totally belongs under Revenue category. Never base a decision solely on the label, you H... Read More
Re: Clarification on LIFO/FIFO adjustment & tax savings
We are lowering our income and EPS to adjust for FIFO to LIFO, hence we are adding 2.4*0.6. But keep in mind, the 2.4 is a NEGATIVE number from cell H48!!
We are lowering our income and EPS to adjust for FIFO to LIFO, hence we are adding 2.4*0.6. But keep in mind, the 2.4 is a NEGATIVE number from cell H48!!
Re: Clarification on cost method and tax differences in the 10K
In cases like this, always go with mgmt figures. There are a gazillion reasons why tax basis changes!
In cases like this, always go with mgmt figures. There are a gazillion reasons why tax basis changes!
Re: Question on adjustment of pre opening expense on diluted normalized EPS
The $15,999 was indeed a one-off item since it was added back. F77 is reported EBIT, so we're adding F78 to get Adjusted EBIT. Costco happened to give us adjusted EPS hence the $0.94 input.
The $15,999 was indeed a one-off item since it was added back. F77 is reported EBIT, so we're adding F78 to get Adjusted EBIT. Costco happened to give us adjusted EPS hence the $0.94 input.
Re: Questions on the slide (various aspects) - 6 questions
Many of these are explained the videos; may we suggest to go back and re-view the videos again; in the meantime, short answers: 1) PF because that's what they'll report going forward 2) Conceptually yes, but in retail, Same Store Sales is best metric for organic so you don't have to worry about ov... Read More
Many of these are explained the videos; may we suggest to go back and re-view the videos again; in the meantime, short answers: 1) PF because that's what they'll report going forward 2) Conceptually yes, but in retail, Same Store Sales is best metric for organic so you don't have to worry about ov... Read More
Re: Questions on the slides (8 questions)
1) Yes, include kp because it is part of funding costs of capital structure 2) Preferred typically is more expensive than debt and less than equity; in terms of valuation, treat it like debt, subtracting it out of TEV to arrive at equity. Throw in value of any converts or warrants for all-in return... Read More
1) Yes, include kp because it is part of funding costs of capital structure 2) Preferred typically is more expensive than debt and less than equity; in terms of valuation, treat it like debt, subtracting it out of TEV to arrive at equity. Throw in value of any converts or warrants for all-in return... Read More
Re: Relationship between P/E and inverse of P/E (2 questions)
1a) Inverse of PE is indeed Earnings Yield. It is NOT cost of equity because cost of equity is typically derived from CAPM whereas PE and Earnings Yield can be thought of as a "market-driven" or "market-demanded" cost of equity. Therefore it WOULD be appropriate to say that Earnings Yield is essenti... Read More
1a) Inverse of PE is indeed Earnings Yield. It is NOT cost of equity because cost of equity is typically derived from CAPM whereas PE and Earnings Yield can be thought of as a "market-driven" or "market-demanded" cost of equity. Therefore it WOULD be appropriate to say that Earnings Yield is essenti... Read More
Re: Adjustments for non-recurring items to calculate adjusted EV/FCFF or other cashflow ratios
In theory, ALL one-time adjustments made on the IS should also flow through to the BS and CF. However this is not practical nor necessary to always implement. Since we are mostly trying to spread our TEV valuation multiples, we just need to focus on Revenue EBITDA, EBIT, Net Income. The major impact... Read More
In theory, ALL one-time adjustments made on the IS should also flow through to the BS and CF. However this is not practical nor necessary to always implement. Since we are mostly trying to spread our TEV valuation multiples, we just need to focus on Revenue EBITDA, EBIT, Net Income. The major impact... Read More
Re: Tax shield effect
Yes we agree with this assessment. Devil's in the details of course as one would have to actually model out the impact to confirm. The increase in cost of equity would come from a higher beta, offset by lower cost of debt and changing the weights. If your WACC template is set up, this should be auto... Read More
Yes we agree with this assessment. Devil's in the details of course as one would have to actually model out the impact to confirm. The increase in cost of equity would come from a higher beta, offset by lower cost of debt and changing the weights. If your WACC template is set up, this should be auto... Read More
1) Take Net Income from Continuing Operations AFTER Minority Interest, so INCLUDING the impact of MI. 2) No, EBITDA from Discontinued Operations is NOT in the "top half" of the Income Statement, it is lumped together in ONE line after NI. 3) In theory, the sell-side research analysts SHOULD be adj... 1) Take Net Income from Continuing Operations AFTER Minority Interest, so INCLUDING the impact of MI.
2) No, EBITDA from Discontinued Operations is NOT in the "top half" of the Income Statement, it is lumped together in ONE line after NI.
3) In theory, the sell-side research analysts SHOULD be adjusting, our experience indicates not always, but you have no choice.
4) Correct.
5) No, ALWAYS read every line of the filing to make sure you caught everything.
6) No one really uses TEV/FCFF
IMPORTANT SIDE NOTE: please never use "EV" as abbreviation. This was explained in the Corporate Valuation course - EV can be misleading and could mean Equity Value or Enterprise Value. Therefore ALWAYS use TEV for Total Enterprise Value. Eq Val is the shortest we allow you to abbreviate Equity Value.
7) You're supposed to use the LATEST basic s/out from the front of the latest filing (10K, 10Q or in Proxy statement); then adjust for dilutive options via treasury method. NEVER EVER trust the share counts from data vendors; they do it wrong. period.
8) Figure out why each class is different. Sometimes it's voting rights and economically they are the same, then you can lump as one class for EPS calculations. Sometimes it's ADRs, figure out the conversion rates (this one is covered in Deal Comps course since we have a foreign company); sometimes like in REITs, they have different dividend payout requirements, then you have to build a waterfall. Most of the time you can lump together, you just have to read to verify.
9) You can only use the information available to you at the time of your analysis; therefore, yes, option information is ALWAYS outdated since most of the time, they only provide annually on the 10Ks. SOME companies (very rarely) provide on 10Qs.
You're welcome!!
Keep up the thoughtful questions! Read More