GAAP vs. non-GAAP earnings

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Beliavsky
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Joined: Sun Jun 29, 2014 10:21 am

GAAP vs. non-GAAP earnings

Post by Beliavsky »

Analyst reports from BoA on Merrill Edge often have a table listing projected earnings (GAAP and non-GAAP) and dividends. The GAAP and non-GAAP earnings are similar for some companies but very different for others. For example, A 02 August 2022 report on Teradata (TDC) with Aug 1 close of 38.25 lists 2022, 2023, and 2024

BoA earnings estimates of 1.58 1.89 2.17
Bloomberg consensus estimates of 1.61 2.04 2.51
GAAP earnings of 0.43 0.82 1.07

There are value ETFs that use P/E ratios as a measure. What they do use? The S&P U.S. Style Indices Methodology says they use earnings "excluding extra items" which I guess means non-GAAP. There have been many academic studies of stock returns conditional on P/E quintile or decile. What have they used? I wonder if long/short strategies based on GAAP or non-GAAP earnings would have worked better historically. There is enough agreement on how to compute non-GAAP earnings that Bloomberg can publish consensus numbers.
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