Thursday, April 21, 2016

As more and more data becomes accessible, especially through Calcbench via XBRL, the ability of people to do more becomes apparent. Over the last few years, Calcbench has made tools available to our users to do more. One of the tools was our Excel Add-in. Another was our footnote query tool which our clients use extensively.

Now that all of these items exist, what can you do that to date has not been possible?

Wait for it!

Calcbench has built a small valuation model template. This template can be made available to customers.

Q: What does it do?

A: Many things.

Users may want to do something like a DuPont Analysis. Our Excel Add-In supports this kind of exercise.

Q: What if the end-user wants to do more than that? Like make adjustments to account for off-balance sheet activity like Operating Leases and Pensions and Adjustments to inventory (e.g. LIFO)?

A: Look at the table. Calcbench makes some of these adjustments in the template and reports back the results.

We also report the ‘as-reported’ numbers for someone to compare.

So let’s summarize what we have done and what the users can do with a little bit of work.

  • Obtain a set of financial metrics for a firm or set of firms
  • Make systematic adjustments to the firm financials based on three commonly manipulated financial accounts:
    • Operating Leases (Currently not on the balance sheet)
    • Defined Benefit Pension Plans
    • Inventory

Q: Why did we do this?

A: We learned early on (from some great people at a terrific firm) that adjustments needed to be made to make apples-to-apples comparisons. Without these adjustments, you really aren’t doing justice to valuation.

Without further ado, here are the results of our analysis for a handful of firms

Please note that all Dollar values are reported in millions

Firm Return on Equity (ROE) Adjusted ROE Rtn on Net Operating Assets (RNOA) Return From Leverage Return From Other Adjusted Net Income Reported Net Income Adjusted Stockholders Equity
Walgreens Boots Alliance, Inc. 13.5% 6.7% 3.7% -5.8% 8.7% $1,071 $4,220 $16,075
CVS HEALTH Corp 14.1% 19.3% 31.2% 25.6% -37.5% $4,972 $5,237 $25,744
Wal Mart Stores Inc 17.6% 17.6% 8.2% -2.0% 11.4% $13,130 $14,694 $74,555
Jpmorgan Chase & Co 9.9% 11.0% 4.1% 18.1% -11.1% $24,780 $24,442 $224,520
Mcdonalds Corp 63.9% 282.1% 52.0% 446.9% -216.9% $4,779 $4,529 $1,694
Verizon Communications Inc 100.2% 179.0% 16.4% 163.4% -0.7% $16,216 $17,879 $9,058
Citigroup Inc 7.7% 7.7% 3.4% 18.2% -13.9% $17,242 $17,242 $223,092
Crown Castle International Corp 21.5% 43.3% 4.4% 1.8% 37.1% $1,531 $1,521 $3,539
Home Depot Inc 111.0% 235.0% 33.1% 189.5% 12.4% $7,115 $7,009 $3,027
Whole Foods Market Inc 14.2% 42.7% 121.7% -66.3% -12.7% $308 $536 $721

What is the takeaway? First, do your homework. Firms report their results many different ways. Know where the profits are coming from. Operations? Financing? Management??

Whatever you decide, come to Calcbench and let us help you with a free trial.

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