Welcome to the Discrepancy Alert, a new feature I’m testing here at On the Street. Think Where’s Waldo? Except this time the game is spotting discrepancies that show up in company regulatory filings from quarter to quarter or year to year.
For you kids out there, a decade or two ago discrepancies in filings could have impact on a stock. That’s especially true if they suggested errors in prior filings (originally in the company’s favor) or other changes in facts or metrics that were never formally announced.
Over time, like everything else, the outing of discrepancies had become so commonplace that investors became inured to them.
Still, while they are often meaningless, there are some that stick out like sore thumbs... and would seemingly require the kind of explanation you’re never likely to see.
Calling All Subscribers
Which is where you – On the Street subscribers – come in...
Finding and outing discrepancies isn’t easy, and is often found in the process of researching a specific company.
There is no better way to find them than to crowdsource.
Such as the one I recently mentioned regarding Paycom ($PAYC). In that example, the company disclosed in this year’s 10-K that its retention rate is continuing to slide, slipping to 90% from 91% 2022.
That’s good to know, but there’s a discrepancy: In last year’s 10-K, Paycom disclosed that its retention rate for 2022 was 93%, not the 91% reported in 2023. “Either way,” I went on to write, “the slip in the retention rate in 2023 was worse than it appears… and if not in 2023, then surely in 2022.” (Revised: The company offered an explanation in its 10-K for the change. Feel free to dive in and read it yourself, which I admittedly missed!)
Another Example…
Another example is the kind of discrepancy found by my friend Rob Wilson, who writes Rob Wilson | Consumer IQ. As he explained in a report he headlined, “Floor & Décor Re-Decorates its 10-K Filing”...
Changing the language of an annual 10-K filing is rare and usually the subject of much discussion internally and externally (with auditors).
He continued...
In an odd move, the company is no longer disclosing its market share or TAM in its annual 10-K filing.
Indeed, as this comparison – courtesy of Hudson Labs – shows very clearly (in the pink): any mention to TAM is removed...
Is that discrepancy meaningful... or meaningless?
The only thing you know is that it was removed for a reason.
Which gets us back to my original idea: If you see a discrepancies you just know are off the baseline, send them my way at herb.greenberg@substack.com.
DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!)
Feel free to contact me at herbgreenberg@substack.com. You can follow me on Twitter (X) and Threads @herbgreenberg.
One of my favorite pastimes is looking for discrepancies in filings! Much can be learned by following the additions, deletions or substitutions in filings as filings are living documents that tell a story and I look forward to more of these posts!
In my view, your 2 examples are a bit different, and I would go so far as to add a third category, though they all fall under the same umbrella.
1) Companies have been know to remove or change the wording from filings that they now perceive to be problematic.
2) There is also the instance, which you pointed out and which happens more than people would like to believe, where a company will deliberately change numbers they have reported in the past.
3) There is also the case where a company stops providing certain metrics that were once supposedly critical in analyzing their business but which are starting to become problematic.
I love pointing these things out when I can find them, since like you, I tend to believe there's a reason companies do these things, and that they will eventually matter.