An acquaintance, with whom I have occasionally swapped views on investments, cornered me today and gave a vigorous endorsement of Mylan N.V. (NSQ:MYL).

We don’t normally agree on much about investing: he’s too willing to believe, I’m too cynical. However, he is in pharmaceutical sales so I thought it was worth a look.

For the past few years I have used a very simple screen before investing any real time or effort in a stock. It is this: how do the Reported Earnings per Share compare to the Normalised Earnings per Share?

A quick review of Mylan, using Stockopedia data showed over 7 reporting periods (6.5 years), total Reported Earnings per Share of $8.97 and total Normalised Earnings per Share of $16.29 – far enough adrift in the wrong direction to end my feeble interest. To benchmark my cynicism I did the same exercise with a large cap American pharmaceutical I am invested in, Celgene (NSQ:CELG). The result: total Reported Earnings per Share $27.18; total Normalised Earnings per Share $26.85. I know why I am invested in Celgene and will not be investing in Mylan.

I read a report today of Kier (Lon: KIE) being in serious financial trouble. As an academic exercise I ran my screen: total Reported Losses per Share, 25.4p – total Normalised Earnings per share 482.9p. Reality verses make believe and reality must always win in the end.

I also ran the screen over what is currently my largest holding and a couple of other shares that have had a lot of publicity on Stockopedia over the past months – see below for the results:

StockReported Earnings/(Losses) per Share
Normalised Earnings/(Losses) per Share
French Connection          (29.51p)
Revolution Bars Group          11.05p
Apollo Global Management         $12.99

It is not definitive and is only backward looking but I have found it has saved a lot of time and for me, sorts the sheep and the goats.

Stay safe out there.


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