Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : Financial Shenanigans: Stocks Looking for a Fall -- Ignore unavailable to you. Want to Upgrade?

To: HeyRainier who wrote (6)	5/12/1998 9:18:00 AM
From: Q.	Read Replies (3) \| Respond to of 108

Two links of interest for fans of Howard Schilit: schilit.com This is his company's page, with older stock reports. I've noticed that many stocks he reports on are large cap stocks whose accounting irregularities are either insignificant or nonexistent IMHO, but one can still find some interesting stuff in there. forbes.com in forbes, search for 'schilit' to find stories where he's quoted. Here's an excerpt from an article earlier this year: To catch a thief By Bernard Condon IN A MARKET OBSESSED with earnings, it's easy to forget about cash flow. A shame. Cash flow is what acquirers look at when considering a buyout. Had investors and analysts paid attention to cash flow, they might not have been burned in the collapse of Fine Host. The food service concessionaire had declined in cash flow even while reporting big earnings gains. Its per-share earnings had more than doubled in the prior three quarters, while operating cash flow fell from $324,000 to - $2.7 million. While reporting good earnings, Fine Host was quietly bleeding to death. "Cash flow is the single best way of catching companies heading for trouble," says Howard Schilit, head of the forensic accountancy Center for Financial Research & Analysis. "You want to see cash flow and net income tracking together." Richard Sloan, an accounting professor at the University of Michigan, has tracked 25 years of cash flow and net income as a percent of corporate assets for 7,000 companies. Was the net income return appreciably higher than the cash flow return? If it was, the stock usually underperformed. A recent example is Cityscape Financial Corp., a mortgage lender to people with lousy credit. Cityscape announced a year ago that it had "record earnings" for the latest quarter and year. But its "quality of earnings ratio," as Sloan calls his formula, was 26%: earnings as a percent of assets were higher by 26% than cash flow as a percent of assets. The stock fell by half over the next two months.