Red Flag Review
Check a company’s filings for warning signs
A Red Flag Review reads two years of a company’s SEC filings and tests them for the patterns that tend to come before restatements and failures. Every finding links to the filing it came from, and every concern comes with its innocent reading.
What a review reads
- Every quarterly and annual report
- Two years of 10-Qs and 10-Ks: management’s discussion, the notes to the financial statements, controls, legal proceedings and risk factors.
- The reported numbers, quarter by quarter
- Profit against cash, receivables and inventory against sales, debt and cash runway, dilution, and figures changed after they were first reported.
- What management says, and stops saying
- The sentences added to and dropped from management’s discussion between reports, and the adjusted figures earnings releases lead with.
- The filing record
- Statements the company told investors not to rely on, auditor changes, late and amended reports, finance-officer departures and SEC comment letters.
- Insiders and the share price
- Open-market buying and selling by officers and directors, and how the stock has moved.
Reviews are part of Premium; anyone can see a review’s level and headline. See plans. Each pattern a review describes has ordinary explanations as well as troubling ones; a pattern is a reason to look closer, not a conclusion about the company. Informational only, not investment advice.