Investors Can Find Comfort In ATS' (TSE:ATS) Earnings Quality

The most recent earnings report from ATS Corporation (TSE:ATS) was disappointing for shareholders. While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

See our latest analysis for ATS

The Impact Of Unusual Items On Profit

To properly understand ATS' profit results, we need to consider the CA$52m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If ATS doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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.

Our Take On ATS' Profit Performance

Unusual items (expenses) detracted from ATS' earnings over the last year, but we might see an improvement next year. Because of this, we think ATS' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 21% per year 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. If you'd like to know more about ATS as a business, it's important to be aware of any risks it's facing. For instance, we've identified 2 warning signs for ATS (1 is concerning) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of ATS' 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 with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.