Are Laneway Resources's (ASX:LNY) Statutory Earnings A Good Reflection Of Its Earnings Potential?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. 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 Laneway Resources (ASX:LNY).

We like the fact that Laneway Resources made a profit of AU$1.66m on its revenue of AU$19.1m, in the last year. The chart below shows that revenue has improved over the last three years, and, even better, the company has moved from unprofitable to profitable.

See our latest analysis for Laneway Resources

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. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Laneway Resources.

Our Take On Laneway Resources' Profit Performance

Because of this, we think that it may be that Laneway Resources' statutory profits are better than its underlying earnings power. If you'd like to know more about Laneway Resources as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Laneway Resources you should know about.

In this article we've looked at a number of factors that can impair the utility of profit numbers, as a guide to a business. 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.

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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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