Alcon's (VTX:ALC) Robust Earnings Are Supported By Other Strong Factors

By
Simply Wall St
Published
August 24, 2021
SWX:ALC
Source: Shutterstock

When companies post strong earnings, the stock generally performs well, just like Alcon Inc.'s (VTX:ALC) stock has recently. Our analysis found some more factors that we think are good for shareholders.

View our latest analysis for Alcon

earnings-and-revenue-history
SWX:ALC Earnings and Revenue History August 25th 2021

How Do Unusual Items Influence Profit?

For anyone who wants to understand Alcon's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$136m 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. Assuming those unusual expenses don't come up again, we'd therefore expect Alcon to produce a higher profit next year, all else being equal.

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 Alcon's Profit Performance

Unusual items (expenses) detracted from Alcon's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Alcon's statutory profit actually understates its earnings potential! 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. For example - Alcon has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Alcon's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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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