Should You Use Intertape Polymer Group’s (TSE:ITP) Statutory Earnings To Analyse It?

Broadly speaking, profitable businesses are less risky than unprofitable ones. That said, the current statutory profit is not always a good guide to a company’s underlying profitability. In this article, we’ll look at how useful this year’s statutory profit is, when analysing Intertape Polymer Group (TSE:ITP).

While Intertape Polymer Group was able to generate revenue of US$1.15b in the last twelve months, we think its profit result of US$40.2m was more important. While it managed to grow its revenue over the last three years, its profit has moved in the other direction, as you can see in the chart below.

View our latest analysis for Intertape Polymer Group

TSX:ITP Income Statement, January 16th 2020
TSX:ITP Income Statement, January 16th 2020

Importantly, statutory profits are not always the best tool for understanding a company’s true earnings power, so it’s well worth examining profits in a little more detail. This article will discuss how unusual items have impacted Intertape Polymer Group’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?

Importantly, our data indicates that Intertape Polymer Group’s profit was reduced by US$15m, due to unusual items, over the last year. It’s never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that’s hardly a surprise given these line items are considered unusual. If Intertape Polymer Group doesn’t see those unusual expenses repeat, then all else being equal we’d expect its profit to increase over the coming year.

Our Take On Intertape Polymer Group’s Profit Performance

Because unusual items detracted from Intertape Polymer Group’s earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Intertape Polymer Group’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. At the end of the day, it’s essential to consider more than just the factors above, if you want to understand the company properly. 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. Luckily, you can check out what analysts are forecsting by clicking here.

Today we’ve zoomed in on a single data point to better understand the nature of Intertape Polymer Group’s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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