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You Can’t Make Up Your Own Metrics

This links to a smart little article (only a short read, don’t be afraid) by Tim Hanson of The Motley Fool, that tells you to be leery of companies that make up their own metrics. Quite right too, here’s an extract to prove it:

Just a few weeks ago, Latin American McDonald’s franchisee ( Arcos Dorados told investors that “organic adjusted EBITDA” was only 4.4% lower in the first quarter of 2014 and that, excluding Venezuela, adjusted EBITDA was up 18.5%! 

What does that all mean? I’ve read the footnotes, and I’m not really sure. All I was able to discern is that performance was a lot worse if one looked at less adjusted metrics.

Full article here
After all, your author had just finished reading the Aurcana (AUN.v) quarterly fubar that had this to say about its earnings in the NR:

Earnings 
The Company had earnings (losses) from mining operations at La Negra for the quarter ended June 30, 2014 in the amount of ($1.4) million (2013: $2.6 million), and $2.0 million for the first six months of 2014 (2013: $7.3 million). The decrease in earnings from mining operations at La Negra for the current period against the same period of the previous year was mainly related to the decrease in metal prices, lower silver grade at the La Negra mine and lower mill through-put as a result of mill downtime due to mechanical problems. 

You see how they did that? Start your sentence with “The company” and then slip quietly into “mining operations at La Negra” as seamlessly as possible? That was the whole lot, and you know they’re BSsing you backwards by selecting one part of the P+L, rather than telling you about corporate earnings. The ‘La Negra’ losses are one thing, the Aurcana (AUN.v) loss happened to be $7,439,537, or 11c per share. The $1.4m they lost just by running their mine, tip of the proverbial iceberg stuff.

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