Recommend Reading: “Stock Profits – Getting to the Core” by Michael C. Thomsett

This is my second time to read this book.

Have you ever figured whether those figures published in companies’ annual report were as they are or manipulated? You may recall some cases happened in the US a few years ago about inflated figures were reported that resulted in tragedy to a number of investors. Therefore, from this lesson, investors should learn how to generate the true picture behind these figures.

The author of this book advices those reported net earnings shall exclude sales of fixed asset, ESOS, benefit plans as well as any non-recurrence item. It is because these items are one-off income or expenses and they are not part of company’s core operation. The net earnings after these adjustments is called core earnings.

It is interesting to realize that core earnings will produce totally different earnings and PE picture. The author illustrates these adjustments for a few listed companies in the US and shows shocking result.

This mechanism can be applied in Malaysia as well. What we need to do is to search those relevant items from the company’s annual report and get the core earnings to understand the company’s actual condition. I have been doing this for years.

Not sure how to go about it? Well, this book is providing step by step workbook for ease of operation.

Happy reading.