Should You Use QANTM Intellectual Property's (ASX:QIP) Statutory Earnings To Analyse It?

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 QANTM Intellectual Property's (ASX:QIP) statutory profits are a good guide to its underlying earnings.

While QANTM Intellectual Property was able to generate revenue of AU$116.6m in the last twelve months, we think its profit result of AU$9.56m was more important. Happily, it has grown both its profit and revenue over the last three years (though we note its profit is down over the last year).

See our latest analysis for QANTM Intellectual Property

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 focus on the impact unusual items have had on QANTM Intellectual Property's statutory earnings. 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 QANTM Intellectual Property's profit was reduced by AU$3.3m, 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect QANTM Intellectual Property to produce a higher profit next year, all else being equal.

Our Take On QANTM Intellectual Property's Profit Performance

Unusual items (expenses) detracted from QANTM Intellectual Property's earnings over the last year, but we might see an improvement next year. Because of this, we think QANTM Intellectual Property's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 32% annually, over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 1 warning sign for QANTM Intellectual Property you should know about.

This note has only looked at a single factor that sheds light on the nature of QANTM Intellectual Property's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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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