Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.
When I say “questionable cash flow sources,” I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That’s not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.
With 24.6% of operating cash flow coming from questionable sources, Globecomm Systems, Inc. (NASDAQ:GCOM) investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 22.7% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 45.4% of cash from operations.
A Foolish final thought
Most investors don’t keep tabs on their companies’ cash flow. I think that’s a mistake. If you take the time to read past the headlines and crack a filing now and then, you’re in a much better position to spot potential trouble early. Better yet, you’ll improve your odds of finding the underappreciated home-run stocks that provide the market’s best returns.
The article Are the Earnings at Globecomm Systems Hiding Something? originally appeared on Fool.com is written by Seth Jayson.
Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool has no position in any of the stocks mentioned.
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