From the Enron trial comes this tidbit:
HOUSTON (AP) — Last-minute changes to quarterly earnings reports prosecutors contend were ordered by Enron Corp. Chief Executive Jeffrey Skilling to improve the company’s reputation on Wall Street were accurate, and not the result of improper tapping of company reserves, a defense expert testified Wednesday. “The whole process of financial reporting, in a company as large as Enron, to get financial statements out … is an enormous undertaking,” said Walter Rush, an accounting expert hired by Skilling. “And people are scrambling, trying to get these estimates put together. “There are changes going on up to the very last second. It is universal. Every company goes through this.”
These are the comments of expert witnesses, that is a given, but still it means the financials are impossible to really know. How can you successfully forecast share price direction using fundamental analysis with company numbers you can’t trust?