The quality of earnings concerns me. As is generally known, many companies are buying back shares with borrowed money. This can be a smart thing to do given that low rates make this financial engineering possible. This juices earnings since there are fewer shares outstanding after each round of buybacks. So even with a flat revenue, you can still achieve “higher earnings”. But what happens when all those easy buybacks stop because of rising interest rates?
So they’re taking on debt to make their earnings look better? Yikes.
get out PE's, div-yields, etc
The quality of earnings concerns me. As is generally known, many companies are buying back shares with borrowed money
Virtually all corporations raise capital with some combination of share sales and borrowing, which is why investors also look at say, debt/equity ratios or return on equity when evaluating an investment. The point is to go past 'quality' and get into 'quantity', in order to calculation how much or how little to invest.
There's a lot of negativism around, but when folks say the metrics are bearish I still get nowhere when it comes to actually getting to see those metrics to compare w/ times past when markets later proved to be failing.