Why does Omaha normalize accounting data?
Omaha offers a large-scale normalized data solution to compare and value companies consistently. Accounting data is not favorably designed for investors, lacking consistency across time, regions, industries, and companies due to varying accounting concepts, conventions, and tax laws. Besides, accounting data is stated at historical cost which can result in an increasing mismatch between profits and the assets used to generate earnings. Omaha transform accounting data into economic information using a systematic, scalable approach combining financial expertise and technical know-how. Omaha’s 25+ year methodology corrects, adjusts, and standardizes company accounts globally, addressing issues like differing reporting standards, inflation, currency issues, intangibles, and asset age, among others, for reliable analysis. By transforming income statement and balance sheet data into a company’s inflation-adjusted internal rate of return (EROI), Omaha offers a clearer view of its true economic profitability. This approach provides objective, comparable, and data-driven insights into a firm’s ability to create or destroy shareholder value. Investors can benchmark Omaha’s intrinsic price with market expectations to determine whether a stock is fundamentally over- or undervalued.
Accounting needs to be adjusted to reflect true companies’ performances
Reported financial statements often fail to reflect a company’s true economic reality. Accounting rules and managerial discretion can significantly distort profitability and make accounting metrics unreliable. In other words, what may be totally alright to be done in the accounting world might be absolute nonsense if you think in economic terms.
Because accounting information can be misleading, Omaha performs several key adjustments, both structural and company specific.
Processing Data: from Accounting to Valuation
