We Like The Quality Of Neo Performance Materials' (TSE:NEO) Earnings

Shareholders appeared to be happy with Neo Performance Materials Inc.'s (TSE:NEO) solid earnings report last week. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers.

Check out our latest analysis for Neo Performance Materials

How Do Unusual Items Influence Profit?

To properly understand Neo Performance Materials' profit results, we need to consider the US$5.6m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Neo Performance Materials 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 Neo Performance Materials' Profit Performance

Because unusual items detracted from Neo Performance Materials' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Neo Performance Materials' earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that Neo Performance Materials is showing 2 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...

Today we've zoomed in on a single data point to better understand the nature of Neo Performance Materials' 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.