It is common today for companies to exclude stock-based compensation (SBC) when reporting “adjusted” earnings.  In management’s eyes, SBC expense is not a cash outflow and is excluded when reporting adjusted earnings. But don’t let that fool you. SBC is a real expense for shareholders. It increases a company’s outstanding share count and reduces future dividends per share. I’ve thought about SBC quite a bit in the last few months. One thing I noticed is that investors often do not properly account for it. There are a couple of different scenarios that I believe should lead to investors using different methods to account for SBC. The first scenario is when a company is both buying back shares and issuing shares to employees as SBC. The easiest and most appropriate way to account for SBC in this situation is by calculating how much the company spent to buy back the stock that...