Estimated, Reported and GAAP

In going through exercises and evaluations, I'm seeing large differences in the Reported Earnings and GAAP Earnings. When I graph the last ten years of quarterly reports of these three statistics, I'm seeing an interesting pattern in some stocks ie: PANW but others as well. I once was wondering whether to use Reported or GAAP earnings, but now I'm convinced to use the GAAP earnings.

When I see the Estimated and Reported earnings on a favorable uptrend, but GAAP earnings not looking good and this trend goes on for several years, I really have to question the ethics of senior management. Interestingly enough, when the Reported earnings, comes down to meet the GAAP earnings, the stock price goes down. hmmmmm, I'd like to hear thoughts on this.


  • Do you mean reported earnings as in non-GAAP earnings? Unfortunately, a lot of companies report earnings this way to skew the numbers and make the street and investors happy. Also keep in mind that 10-Q filings are usually not audited as opposed to the financial statements included in a 10-K that are. Estimated earnings and forward earnings should always be taken with a grain of salt, maybe even ignored. Read Chapter 12 of the Intelligent Investor.
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