, Inc. (CRM), Netflix, Inc. (NFLX), & Groupon Inc (GRPN): Could One of These Stocks Be the Next Muddy Waters Target? (CRM)Muddy Waters has been instrumental in exposing a number Chinese frauds. The firm, run by Carson Block, has issued reports on reverse mergers like RINO International and Sino Forest.

Now, Muddy Waters may be shifting its focus to Silicon Valley. According to The Wall Street Journal, Block will look to find tech companies that are exaggerating their earnings with creative accounting measures.

In the past, reports from Muddy Waters have been enough to send shares of target companies tumbling. Could investors awake to find that Block has issued a report on one of their holdings?

Is profitable or not?

Like many companies,, inc. (NYSE:CRM) reports two sets of earnings: one based on GAAP, another on the opinions of the company’s management (non-GAAP).

But with Salesforce, there’s a stark difference. According to standard accounting rules, Salesforce is losing money. But according to, inc. (NYSE:CRM)’s management, it’s profitable.

As Barron’s points out, this is primarily due to stock-based compensation. Standard accounting rules require companies to include this in their earnings; Salesforce would prefer investors overlook it.

For the last quarter, the difference was between a loss of $0.12 per share and a profit of $0.10. A quarter before that, it was even worse — a loss of $0.14 compared to a gain of $0.51.

And any way you look at it,, inc. (NYSE:CRM) is an expensive stock. Even using the company’s non-GAAP accounting figures, shares are trading with a price-to-earnings ratio of nearly 100 — compared to a figure of roughly 18 for the broader market.

Netflix’s off-balance sheet liabilities

Video streaming giant Netflix, Inc. (NASDAQ:NFLX) may have some issues with off-balance sheet liabilities. In order to function, the company must buy the rights to stream content owned by other companies — something that’s becoming increasingly more expensive.

These agreements often take the form of multi-year pacts, and saddle the company with billions of dollars in future obligations.

As Zerohedge has pointed out, not all of these obligations are being accounted for. As of the end of March, Netflix, Inc. (NASDAQ:NFLX) had $5.7 billion of content liabilities. Only $2.4 billion of it was listed on the company’s balance sheet.

In terms of Netflix’s financial metrics, these off-balance sheet liabilities — if accounted for — could completely change the company’s price-to-book ratio.

How important is that to Netflix, Inc. (NASDAQ:NFLX)’s investors? Frankly, probably not much. The stock already trades with a price-to-book ratio over 15 and a PE ratio over 500 — extremely high figures on a relative basis.

Investors in Netflix are probably more intrigued with future possibilities rather than Netflix, Inc. (NASDAQ:NFLX)’s current financial state.