Statutory Profit Doesn't Reflect How Good TELUS' (TSE:T) Earnings Are

The subdued stock price reaction suggests that TELUS Corporation's (TSE:T) strong earnings didn't offer any surprises. Our analysis suggests that investors might be missing some promising details.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand TELUS' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CA$732m due 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. 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. If TELUS 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 TELUS' Profit Performance

Unusual items (expenses) detracted from TELUS' earnings over the last year, but we might see an improvement next year. Because of this, we think TELUS' earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 21% over 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. So while earnings quality is important, it's equally important to consider the risks facing TELUS at this point in time. For example, we've found that TELUS has 3 warning signs (2 are a bit unpleasant!) that deserve your attention before going any further with your analysis.

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