As a barometer of a company's health, OPS is more reliable than earnings per share (EPS), which can be too easily massaged, the brothers contend. A company either has cash or it doesn't. And, as Dartmouth business professor Rajesh Aggarwal notes, operational cash flow "does make adjustments for things like depreciation and amortization, and it takes into account changes in working capital."Specifically, the gentlemen interviewed in the article, David and Mark Markowski, use the metric to try to predict the early stages of company-specific inflection points.
...a particular anomaly: negative OPS despite a company's reporting of "record" positive earnings. The phenomenon, which Mike Markowski calls "the EPS syndrome," often is the "first indicator that a company may be in trouble," David says.Make sure to check the article, and if you're not following @smallcapanalyst already, do so without delay.