medium · Investment Banking
If a company has a higher SBC-to-Revenue ratio than its peers, what might this suggest to an analyst regarding its reported operating margins?
- The company is more efficient because it doesn't have to pay its employees with cash.
- The company's GAAP operating margins may be lower than peers, even if its 'Adjusted' (cash) margins are similar.
- The company's Cash Flow from Operations is likely lower than its Net Income.
- The company's P/E multiple will be lower because of the high non-cash charges.
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