Overheads larger than gross profit
When SG&A exceeds gross profit, the company loses money before it has spent anything on research.
Findings
Collecting more slowly as sales decline
Receivables growing while revenue shrinks means the company is being paid later for less.
Depreciating faster than they reinvest
When depreciation exceeds capital expenditure, the asset base is shrinking. The cash flow looks better while it happens.
Spending more on assets than the business brings in
Capital expenditure above operating cash flow means the investment is being funded externally. Sometimes that is the whole strategy.
Buying back more stock than the business generated
Repurchases exceeding free cash flow are funded from somewhere else. The somewhere else is the point.
Profitable, and paying under 10% tax
A low effective rate can mean aggressive structuring, or it can mean the company is using losses it made years ago.
More due within a year than is available to pay it
A current ratio below one is a textbook liquidity warning. For the largest companies on this list it is a sign of strength.
Paying more than a tenth of revenue in stock
Stock-based compensation is a real cost paid in a currency the company prints. These companies print a lot of it.
When most of the balance sheet is goodwill
Goodwill is the premium paid for past acquisitions. For these companies it is the largest thing they own.
When profit is larger than the profit from operating
Net income above operating income means most of the difference was made somewhere other than the business.
Holding the dividend while profit falls
Dividends are a promise companies are reluctant to break. Here is where that reluctance is being tested.
Growing five years running on almost no capital
Companies that grew revenue every year for five years while spending under 3% of it on capital expenditure.
Inventory going up while revenue goes down
The oldest warning sign in fundamental analysis, and what it actually catches in current filings.
Three consecutive years of falling revenue
Sustained decline at scale, and the commodity cycle that explains much of it.
Borrowings above five times equity
A leverage screen that catches both genuinely stretched balance sheets and companies that have simply bought back a lot of stock.
Spending more than a fifth of revenue on research
R&D at this intensity is either a moat being dug or a treadmill being run. The filings alone will not tell you which.
Growing revenue while the margin erodes
Three years of revenue growth, three years of falling gross margin. Growth that costs more each year to buy.
Ten years without a single reported loss
A decade of unbroken profitability is rarer than it sounds, and the list is not the one most people would guess.
The companies that report no long-term debt
A screen for companies with no long-term debt returns some of the most heavily indebted companies in America. The reason is worth understanding.
Companies that owe more than they own, and are fine
Negative shareholder equity sounds like insolvency. For most of the companies reporting it, it is the arithmetic of a long buyback programme.
Profitable on the income statement, burning cash in reality
Net income and free cash flow disagree more often than they are supposed to. These are the companies where the gap runs the uncomfortable way.
Above 80% gross margin, and why health insurers are on the list
The very highest gross margins belong to software, pharmaceuticals — and a set of companies that report no cost of revenue at all.
Shrinking the share count while losing money
Buying back stock out of profit is capital return. Buying it back during losses is a different decision, and more companies make it than you would think.