OraSure Technologies – Filing Season Finds: Thursday, March 16

Our latest forensic accounting red flag is from a small medical device company with unsustainable growth driven by a one-time gain.

We pulled this highlight from yesterday’s research of 48 10-K filings, from which our robo-analyst technology collected 6,034 data points. Our analyst team used this data to make 964 forensic accounting adjustments with a dollar value of $135 billion. The adjustments were applied as follows:

  • 390 income statement adjustments with a total value of $11 billion
  • 407 balance sheet adjustments with a total value of $55 billion
  • 167 valuation adjustments with a total value of $69 billion

Figure 1: Filing Season Diligence

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OraSure Technologies

We believe this research is necessary to close the gap between the suitability and fiduciary standard of investment advice services.

Today’s Forensic Accounting Needle In A Haystack Is For Health Care Investors

Analyst Lindsay Bohannon found an unusual item yesterday in OraSure Technologies’ (OSUR) 10-K.

On page 62, OraSure Technologies disclosed $5.4 million in non-recurring revenue as the result of the early termination of a promotion agreement with AbbVie (ABBV). This hidden non-operating income helped OSUR report GAAP earnings of ~$20 million, a 140% gain from 2015. Removing this non-operating income, along with other adjustments, revealed that OSUR’s net operating profit after tax (NOPAT) grew by 80% to ~$14 million.

2016 was still a great year for OraSure Technologies, and it earned its best return on invested capital (ROIC) in over a decade. Our research in the footnotes shows, however, that its growth trajectory is not as impressive as GAAP numbers suggest.

This article originally published here on March 16, 2017.

Disclosure: David Trainer, Lindsay Bohannon, and Sam McBride receive no compensation to write about any specific stock, sector, style, or theme.

Article by Sam McBride, New Constructs