New Constructs founder demos a valuation platform that links every number back to original 10-K filings and footnotes. Users can override income statement items with one click, run scenario analysis on growth rates and WACC, and surface hidden balance-sheet items from footnote reviews. Every adjustment is auditable.
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We founded New Constructs to provide our institutional money management clients with the best models in the world. The services we're providing via our models are cash flow and earnings quality research and valuation analysis, quantifying the expectations required to justify stock prices along multiple scenarios for future cash flows. The value delivered is real due diligence in 10-Ks and 10-Qs, real understanding of the economics of the business despite accounting anomalies, Loopholes, distortions, etc. We're turning over all the stones so our clients can trust that they have the complete financial picture at their fingertips when making investment decisions. And the proof of our value-add is in our transparency. We want our clients to know how much work we do for them. So we show you all the adjustments we make and the data we use to make all those adjustments. When you stack us up to the competition, there are big differences when it comes to footnotes, when it comes to due diligence, when it comes to transparency. In particular, we're the only firm that I know of that actually analyzes the MD&A as well as the footnotes on a consistent basis. Basis. Other firms are just taking fees from firms like Compustat or others. We're the only research firm that provides investment ratings that can actually link our models back to the original source filings used to derive the analytics and criteria behind all of our ratings. So let's get to the models. You access them from the rating page or from the ratings detail section on your My Portfolio page. When you click the company model button, it takes you to the decision page, which is a valuation analysis looking at the future cash flow stream required to justify the current stock price. You can see here that you're able to compare multiple scenarios. Here we have a neutral and a default. Different growth rates imply different stock prices over the same forecast horizon, the same time period. What I also want to show you is clear and obvious is that we've done our diligence on understanding profitability historically. The metrics page shows you all the key metrics in our model going all the way back to as far back as the company has provided filings in digital form. For this company, They didn't file in a digital format until 2000. We'll also show you all of the adjustments we make on the Income Statement to get NOPAT. On the Balance Sheet to get Invested Capital and Average Invested Capital. Note the green dots. These are all meant to indicate overrides. And we have plug overrides. So as to save you the time of actually having to override every single adjustment, just override all of the adjustments with one item in NOPAT. Or all of the adjustments with one item in Net Working Capital. Or fixed assets. And then we'll even show you where we got the data to make those adjustments. You want to see the balance sheet that we parsed? Here it is. You want to see any of these non-recurring items? This one comes from the footnotes. It's a legal settlement that you wouldn't know about if you didn't go all the way to page F71. These are all big numbers, all buried in other expense or income on the income statement that you'd never know about if you didn't go through the footnotes. If you want to know more about what we call our hidden items, We'll show you those as well. This one comes from page 67. This one comes from the cash flow statement. If you want to know about off-balance sheet debt, we'll show you that as well. That's page F64. The point is nobody else in the business will actually link their models back to the original filings from which the data is collected. And you can do this for any year in our model. Again, this auditability is a very unique feature and it shows the confidence that we have not only in our data but also our models. And we challenge you to ask any of our competitors to provide you the same level of transparency as well as the same level of sophistication when it comes to showing you how we're adjusting the income statement. How we can reconcile GAAP net income back to economic earnings. Again, all from many, many years of history. We'll show you exactly how we calculate NOPAT. We'll show you exactly how we calculate invested capital. And you can see here I actually have an active override. If you want to see the overrides, click on the dot and it takes you to the overrides page. Here you can put in whatever you want to change what our models show to reflect what you want. Again, we're not in the business of selling religion. We're in the business of collecting data so you have the most complete financial picture when analyzing the company. You can see here I have an override for accumulated asset write-downs after tax. I zeroed those out. Now in this case, I can also turn this override off so that it disappears and the real numbers come back, or I can turn them on again very easily as well. The takeaway though is that when going back through the financials, that override will no longer be active and the return on capital and all subsequent downstream calculations will be adjusted. Again, complete transparency and flexibility in order to give the power of the model to the client. Not in our methodology. And when it comes to valuation, we're just as transparent. We have the ability to look at multiple scenarios for future cash flows and plot those out over time. So you can see the impact of a pessimistic scenario or an optimistic scenario on your opinion of the valuation. If you want to see the discounted cash flow analysis behind what you see on the decision page, we'll show you that as well. And we show this all the way out into the future. And you can see year 9 is the year in which we get a value in the DCF that's equal to but still less than the current market price, which is why on our decision page we saw 9 years for the neutral scenario as the growth appreciation period, along with 5% compound annual growth rate in revenues and an average economic earnings margin or return on capital versus cost of capital spread of -2.5% over that time frame. If you want to see the WACC, weighted average cost of capital, behind the model, there it is. Oh no, it's another override. Let's see what happens if we turn that override off. Scroll down, find the WACC override, turn it off. Then we go back to the decision page and we find a very different story about the valuation of this stock. With a higher WACC, you can see now in the pessimistic scenario, it takes 85 years of profit growth to justify the current stock price. Under the optimistic scenario, you got 10 years. Under the neutral scenario, before, we only needed 9 years. Now, in the neutral scenario, it takes more than 100 years. So, the model is completely dynamic and customizable for our clients. We allow you to perform the valuation and scenario analysis needed to make truly diligent decisions. The valuation models are built on due diligence in the footnotes and the filings that you can audit, that we can prove. And we challenge our competitors to provide models that do as much diligence and provide as much value-add as what we aim to do here at New Constructs. Thank you.
