Something Wicked Part 2 – The Roach Motel

In Something Wicked This Way Comes, we provided an in-depth look at how stock repurchases are distorting McDonald’s (MCD) earnings per share and making the company look more profitable than it truly is. When such financial wizardry is considered alongside the growing popularity of passive investment strategies and overall sense of market euphoria, we have a better appreciation for why MCD trades at a valuation higher than fundamentals suggest would be appropriate.
We thought it would be helpful to extend this analysis to the entire S&P 500 to see if we can uncover other companies demonstrating fundamental and valuation divergences similar to MCD.
Who Else?
Similar to the MCD analysis, we evaluated changes in fundamentals, equity price and valuation data over the last five years for most companies that comprise the S&P 500. The data below, summarizing our broad findings, is based on 475 of the 505, S&P 500 companies. 30 companies were omitted from the analysis due to insufficient data.
141 companies, or about 30% of the S&P 500, had annualized five-year sales growth rates of 1% or less. Of these 141 companies:

This post was published at Zero Hedge on Nov 1, 2017.