ROIC and EPS Evaluation During Vesting Period of SBC

Subject : ROIC and EPS Evaluation During Vesting Period of SBC

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If Investors agree to accept SBC as an expenses, the following should be adjusted to alleviate (to some extend but not much) the damages done on the EPS (double penalties on profit and diluted share count by GAAP) :

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Prerequisite :

SBC = As Expense in GAAP P/L

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For ROIC and EPS Evaluation During Vesting Period of SBC:

Share Count = Diluted Share Outstanding (After SBC Settled, Basic = Diluted)

NOPAT = As It Is in GAAP P/L, can't avoid

Net Income = As it is in GAAP P/L, can't avoid

B/S = As it is in GAAP B/S

Adjustment to ROIC denominator = Invested Capital - SBC

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Remark :

Above measurement alleviate (to some extend but not much) the damages done on the EPS (double penalties on profit and diluted share outstanding by GAAP).

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To further alleviate the damages, investor may consider to take :

Share Count = Basic Share Outstanding (During vesting period, SBC component share is not recognized in Basic Share Outstanding but in Diluted Share Outstanding yes. After the SBC is Settled, Basic Share Outstanding = Diluted Share Outstanding)

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If conservative investor's intention is to compute lower EPS to derive lower intrinsic value, then take Share Count = Diluted Share Outstanding.

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Reflection Remark:

Treating RSU based SBC as EXPENSE, by GAAP, DESTROYS the FINANCIAL STRUCTURE during the VESTING PERIOD.