We Think You Can Look Beyond Magellan Aerospace's (TSE:MAL) Lackluster Earnings

The market shrugged off the recent earnings report from Magellan Aerospace Corporation (TSE:MAL), despite the profit numbers being soft. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for Magellan Aerospace

The Impact Of Unusual Items On Profit

For anyone who wants to understand Magellan Aerospace's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CA$4.7m due 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Magellan Aerospace to produce a higher profit next year, all else being equal.

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 Magellan Aerospace's Profit Performance

Because unusual items detracted from Magellan Aerospace'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 Magellan Aerospace's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you want to do dive deeper into Magellan Aerospace, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 3 warning signs for Magellan Aerospace and you'll want to know about them.

Today we've zoomed in on a single data point to better understand the nature of Magellan Aerospace'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.

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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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