non-GAAP recast short
In plain terms
When a company starts excluding more expenses from its custom adjusted earnings, it is often dressing up the numbers before bad news, so the strategy bets against it.
How it works
Opportunistic redefinition of adjusted/non-GAAP metrics (newly excluding a recurring expense, recasting prior periods, or expanding the count of adjusting items) is earnings-management-by-disclosure that inflates the headline figure and tends to precede disappointment. The MD&A (Item 7) non-GAAP adjustment intensity is measured per 1000 tokens, year-over-year delta taken, then z-scored against the firm's own past filings.
Live results
0 times picked on its own · 68 times inside a blend (67 beat the stock) · updated 2026-06-06Data dependencies
- Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
- SEC 10k sections
A data feed this strategy reads, refreshed on its normal schedule.
Expected edge
Aggressive non-GAAP exclusions are associated with subsequent negative returns and earnings-quality erosion.
Related families
Read each year's 10-K through a finance-specific positive/negative word filter. Companies whose tone got more positive year-over-year tend to outperform after the filing date; those whose tone got more negative tend to lag.
Spike in Item 1A risk-factor changes predicts ~2% underperformance over the next quarter.
Big jumps in DEF 14A comp-disclosure text often presage earnings management — short signal.
If a company's 10-K barely changes year-over-year, the business is boring-and-steady and outperforms. Big text changes signal hidden bad news.
Explore non-GAAP recast short on alphactor.ai
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