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Pandemic Profits Show Why Stock Bulls Ignore Old-School Accounting

  • Number of firms with R&D exceeding income is near decade high
  • Intangibles mean S&P 500 earnings power could be 10% higher
Times Square As U.S. Stocks Climb On Earnings
Photographer: Bloomberg/Bloomberg

The higher stocks go, the louder the forecasts for their demise. Prices are hopelessly stretched, warn the naysayers -- the gains aren’t justified by earnings.

But to a growing number of investors, the problem isn’t bloated valuations. It’s that longstanding accounting standards misclassify billions of dollars of cash-cow assets as if they’re drags on businesses.