Does American Outdoor Brands’s (NASDAQ:AOBC) Statutory Profit Adequately Reflect Its Underlying Profit?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it’s not always clear whether statutory profits are a good guide, going forward. This article will consider whether American Outdoor Brands‘s (NASDAQ:AOBC) statutory profits are a good guide to its underlying earnings.

It’s good to see that over the last twelve months American Outdoor Brands made a profit of US$3.29m on revenue of US$615.8m. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

View our latest analysis for American Outdoor Brands

NasdaqGS:AOBC Income Statement, January 5th 2020
NasdaqGS:AOBC Income Statement, January 5th 2020

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted American Outdoor Brands’s most recent profit results. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

How Do Unusual Items Influence Profit?

For anyone who wants to understand American Outdoor Brands’s profit beyond the statutory numbers, it’s important to note that during the last twelve months statutory profit was reduced by US$10m due to unusual items. It’s never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that’s exactly what the accounting terminology implies. Assuming those unusual expenses don’t come up again, we’d therefore expect American Outdoor Brands to produce a higher profit next year, all else being equal.

Our Take On American Outdoor Brands’s Profit Performance

Unusual items (expenses) detracted from American Outdoor Brands’s earnings over the last year, but we might see an improvement next year. Because of this, we think American Outdoor Brands’s earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. Of course, we’ve only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Obviously, we love to consider the historical data to inform our opinion of a company. But it can be really valuable to consider what other analysts are forecasting. At Simply Wall St, we have analyst estimates which you can view by clicking here.

This note has only looked at a single factor that sheds light on the nature of American Outdoor Brands’s profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.