Planet MicroCap Podcast | MicroCap Investing Strategies Quality of Earnings and Dilution Risk with Ryan Telford, Head of Evidence-Based Research at MicroCapClub
Feb 13, 2026
Ryan Telford, Head of Evidence-Based Research at MicroCapClub and microcap investing researcher, explains why headline profits can mislead. He discusses quality of earnings metrics like cash support and stability. He also dives into dilution risk, how equity raises erode returns, and scorecards that predict future share issuance.
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Score Earnings With A QC Checklist
- Score cash flow, free cash flow, capex reinvestment, receivables and inventory discipline to gauge earnings quality.
- Use a simple 0–10 scorecard to rank profitable microcaps by how closely earnings reflect economic reality.
High-Quality Earners Outperform
- Even among profitable U.S. microcaps, half score low on quality and underperform over a 10-year horizon.
- High-quality earners substantially outperform low-quality peers with markedly higher CAGR.
Track QOE Over Time
- Track quality-of-earnings scores quarter-to-quarter rather than relying on a single snapshot.
- Combine QOE scores with valuation, growth, and momentum to add a safety layer to stock selection.
