1. VRX declined to disclose revenue segmentation by products after acquisition(the only one to do this in industry), making it almost impossible to track product revenue growth; After digging, he suspects some of revenues may be inflated.
2. they used average CAGR instead of weighted average CAGR to inflate growth number of their acquisitions.
Investors falling in droves for an amazingly advertised company with opaque accounting hiding unsustainable business performance? Oh my god, what a news! )))
Classic pattern for these companies: a) they tend to present themselves as discoverers and sole beneficiaries of a certain business optimization strategy which actually contains absolutely nothing new. (Be that "buying undervalued oil land", "saving on RnD costs in pharma", or "giving people discounts") b) they tend to claim that strategy working based on a couple of years of operations for which they provide opaque/misleading/non-GAAP reporting. c) they adamantly deny comparisons to "conventional" businesses in the field, referring to a)
So far, it's not really one for 10-K nuts. One of the early points being that VRX is not putting enough information in their 10-K to allow meaningful analysis of acquisition performance.
Ha ha ha.
ReplyDeleteOh dear. A nice long rant (incomplete) but there's a very simple moral: incomplete disclosure should be a warning!
1. VRX declined to disclose revenue segmentation by products after acquisition(the only one to do this in industry), making it almost impossible to track product revenue growth; After digging, he suspects some of revenues may be inflated.
ReplyDelete2. they used average CAGR instead of weighted average CAGR to inflate growth number of their acquisitions.
Conclusion: don't trust the management.
Investors falling in droves for an amazingly advertised company with opaque accounting hiding unsustainable business performance?
ReplyDeleteOh my god, what a news! )))
Classic pattern for these companies:
a) they tend to present themselves as discoverers and sole beneficiaries of a certain business optimization strategy which actually contains absolutely nothing new. (Be that "buying undervalued oil land", "saving on RnD costs in pharma", or "giving people discounts")
b) they tend to claim that strategy working based on a couple of years of operations for which they provide opaque/misleading/non-GAAP reporting.
c) they adamantly deny comparisons to "conventional" businesses in the field, referring to a)
So far, it's not really one for 10-K nuts. One of the early points being that VRX is not putting enough information in their 10-K to allow meaningful analysis of acquisition performance.
ReplyDeleteAt least there is some Attachment to reality. Some companies like SunEdison in particular are in total fantasy land.
ReplyDeleteSo John, are you short VRX?
ReplyDeleteExtremely insightful case study.
ReplyDelete