WSP Global's (TSE:WSP) Strong Earnings Are Of Good Quality

Even though WSP Global Inc.'s (TSE:WSP) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

View our latest analysis for WSP Global

The Impact Of Unusual Items On Profit

To properly understand WSP Global's profit results, we need to consider the CA$147m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If WSP Global 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 WSP Global's Profit Performance

Unusual items (expenses) detracted from WSP Global's earnings over the last year, but we might see an improvement next year. Because of this, we think WSP Global's 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 43% per year over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing WSP Global at this point in time. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of WSP Global.

Today we've zoomed in on a single data point to better understand the nature of WSP Global'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 with high insider ownership.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.