Broadly speaking, profitable businesses are less risky than unprofitable ones. 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. Today we’ll focus on whether this year’s statutory profits are a good guide to understanding CONSOL Energy (NYSE:CEIX).
It’s good to see that over the last twelve months CONSOL Energy made a profit of US$63.9m on revenue of US$1.32b. The chart below shows how it has grown revenue over the last three years, but that profit has declined.
Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted CONSOL Energy’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 CONSOL Energy’s profit received a boost of US$26m in unusual items, over the last year. While it’s always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that’s exactly what the accounting terminology implies. If CONSOL Energy doesn’t see that contribution repeat, then all else being equal we’d expect its profit to drop over the current year.
Our Take On CONSOL Energy’s Profit Performance
Arguably, CONSOL Energy’s statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that CONSOL Energy’s true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company’s potential, but there is plenty more to consider. If you’d like to know more about CONSOL Energy as a business, it’s important to be aware of any risks it’s facing. For example, we’ve found that CONSOL Energy has 5 warning signs (2 can’t be ignored!) that deserve your attention before going any further with your analysis.
This note has only looked at a single factor that sheds light on the nature of CONSOL Energy’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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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