Stock Analysis

Black Diamond Group's (TSE:BDI) Shareholders May Want To Dig Deeper Than Statutory Profit

TSX:BDI
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Black Diamond Group Limited's (TSE:BDI) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

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earnings-and-revenue-history
TSX:BDI Earnings and Revenue History March 9th 2023

The Impact Of Unusual Items On Profit

For anyone who wants to understand Black Diamond Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CA$5.2m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Black Diamond Group doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Black Diamond Group's Profit Performance

Arguably, Black Diamond Group's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Black Diamond Group's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 26% in the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 2 warning signs for Black Diamond Group you should know about.

This note has only looked at a single factor that sheds light on the nature of Black Diamond Group's 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 that insiders are buying.

Valuation is complex, but we're helping make it simple.

Find out whether Black Diamond Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.