Quality of Earnings [Paperback]

Thornton L. O'glove (Author)

Book Description

Publication Date: October 1, 1998

An indispensable guide to determining how much money a company is really making and for buying and selling stocks without making costly blunders.

--This text refers to an out of print or unavailable edition of this title.

Editorial Reviews

From Library Journal

O'glove is a former securities analyst who started the Quality of Earnings Report , used by many investment firms. With business historian Sobel, O'glove details a methodology to help the investor understand the role of the corporate annual report, cash flow and debt analysis, accounts receivable and inventories, the differences between shareholder reports and tax reports, and other documentation submitted to shareholders and potential investors. He advises investors to look carefully at all of the above, and he explains how to do research for more information. The book has a style suited to the investor with some experience and is technical. But it offers a great deal of substantive information that may be useful to those who use business libraries and collections. Steven J. Mayover, Free Library of Philadelphia
Copyright 1987 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.

Product Details

• Paperback: 224 pages
• Publisher: Free Press (October 1, 1998)
• Language: English
• ISBN-10: 0684863758
• ISBN-13: 978-0684863757
• Product Dimensions: 9.1 x 6 x 0.6 inches
• Shipping Weight: 7.2 ounces (View shipping rates and policies)
• Average Customer Review: 4.6 out of 5 stars  See all reviews (14 customer reviews)
• Amazon Best Sellers Rank: #48,540 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

38 of 41 people found the following review helpful:

5.0 out of 5 stars A stock owner & short seller's manual, October 29, 2000

By A Customer

This review is from: Quality of Earnings (Paperback)

"Quality of Earnings" takes a vital approach toearnings analysis--looking beyond raw earnings as spun by companymanagement for "the street". O'Glove covers basics (Chapter1: "don't trust your [sell-side] analyst"), and goes on toincredibly important basics that most individual investors are notexposed to through CNBC and other mass media outlets (includingsell-side analysts' reports). Example: tracking inventory build-up andaccounts receivable levels can make you a lot of money(short-selling--note: this is a very risky practice), or alternatelysave your rear end (if "long-only").

"Shareholderreporting versus tax reporting," has its own chapter--as itshould. I would pay 10 times the price of the book just for thischapter, as the concept is unique as far as I've read.

The CFRA... and various other firms use the same simple concepts in this bookto advise their giant money-manager clients about the quality ofvarious public companies' earnings. Money managers pay many thousandsof dollars a year for research based on the principles offered in"Quality of earnings".

A warning: reading this bookcoupled with listening to public companies' management may lead you toshort selling; if you remain "long only", this book maymerely save your rear end.

"Quality of Earnings" is aimedat those who are willing to devote a little time to research on whatthey own; there are no hard & fast rules in here, just businesscommon sense and insight honed through years of work andobservation.

This book and Schilit's "FinancialShenanigans" remain very close to my heart.

21 of 22 people found the following review helpful:

4.0 out of 5 stars Financial Rapport, July 12, 2002

By 

dennis wentraub (schenectady, new york USA) - See all my reviews
(VINE VOICE)    (REAL NAME)   

Amazon Verified Purchase

This review is from: Quality of Earnings (Paperback)

Investors who want to survive need to avoid torpedo stocks - the one's you don't see coming to blow a hole in your portfolio. This requires arming yourself with a healthy skepticism. Your stock analyst may be under pressure not to disrupt investment banking deals with negative reports. The auditor's independent review may be compromised by a desire to secure "fat fees" for a host of additional advisory services. Bottom line: Investors need to trust in their own abilities and do the job of reading corporate reports themselves. Read the annual report and more detailed SEC required 10-K filing. This is the simple message of QUALITY OF EARNINGS. Interpreting trends in accounts receivable and inventory levels from publicly available reports are useful tools to spot problems before they impact a stock's price. This is the author's "most important" chapter and it is as good a discussion as I have seen on the subject. The importance of understanding accounting practice changes and their immediate impact on how earnings are reported is another important matter that gets attention here. We also see why "big bath" restructuring charges that lower the bar for short term earnings growth expectations have become a predictable consequence of corporate acquisitions and CEO transitions. Much of this material will be familiar to readers of more current books on the topic, but O'glove's clear explanations and use of the numbers to support his conclusions are instructive. Because this book was written in 1987 the majority of examples used are quaint at best (e.g., Church's Fried Chicken, Coleco, Adademy Insurance Group, etc.). On the other hand, describing accounting changes at IBM or GE's managed use of tax losses through its Credit Corporation unit (GECC) may resonate rather differently with today's wary investor. A chapter dealing with dividends, the "tender trap", reflects recent, not current, thinking. O'glove's position is that "minimal or no dividends" is the best corporate policy. It is a fair discussion. This has been a general consensus for years because of the issues of double taxation and a conviction that capital can be more efficiently employed in a company's core business development. Currently, in the throes of a bear stock market, investors have sought dividend bearing stocks to hedge market volatility, as a tangible sign of legitimate profits (showmethemoney) when accounting scandals are discovered, and more broadly as way of supplementing retirement income. Preferences change, but one thing is certain. The issue of transparency in the markets is critical to assessing value. This book is an excellent introduction to the topic.

29 of 32 people found the following review helpful:

3.0 out of 5 stars Depends upon the reader's background, August 23, 2007

By 

Everett K. Truitt (Dallas, TX USA) - See all my reviews
(REAL NAME)   

This review is from: Quality of Earnings (Paperback)

I read this book because a Wall Street Journal story referred to it as "the" source for quality of earnings analysis. I was somewhat disappointed with the quantity and quality of new information and analytical techniques, but that's not a knock on the book. I think it boils down to your background. If you're a CFO, Controller or seasoned accountant, there may not be alot of new information here for you. The book may be much better for financial analysts that don't have a strong accounting background but need to be able to determine earnings quality. I personally found Creative Cash Flow Reporting (Mulford & Comiskey) to be more useful. Nevertheless, I'm glad to have Quality of Earnings in my library.