Why Gulf Marine Services' (LON:GMS) Shaky Earnings Are Just The Beginning Of Its Problems

Gulf Marine Services PLC's (LON:GMS) stock showed strength, with investors undeterred by its weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Gulf Marine Services.

View our latest analysis for Gulf Marine Services

How Do Unusual Items Influence Profit?

To properly understand Gulf Marine Services' profit results, we need to consider the US$7.8m 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. Which is hardly surprising, given the name. If Gulf Marine Services 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 Gulf Marine Services' Profit Performance

Arguably, Gulf Marine Services' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Gulf Marine Services' true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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. So while earnings quality is important, it's equally important to consider the risks facing Gulf Marine Services at this point in time. Every company has risks, and we've spotted 3 warning signs for Gulf Marine Services (of which 1 is concerning!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Gulf Marine Services' 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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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.