Inter-Rock Minerals' (CVE:IRO) Profits Appear To Have Quality Issues

Inter-Rock Minerals Inc. (CVE:IRO) just released a solid earnings report, and the stock displayed some strength. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

View our latest analysis for Inter-Rock Minerals

The Impact Of Unusual Items On Profit

To properly understand Inter-Rock Minerals' profit results, we need to consider the US$502k gain attributed to 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'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Inter-Rock Minerals.

Our Take On Inter-Rock Minerals' Profit Performance

Arguably, Inter-Rock Minerals' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Inter-Rock Minerals' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 9.4% EPS growth in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 3 warning signs for Inter-Rock Minerals (1 shouldn't be ignored!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Inter-Rock Minerals' 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.

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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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