Investors Shouldn't Be Too Comfortable With Ocean Wilsons Holdings' (LON:OCN) Earnings

Despite posting some strong earnings, the market for Ocean Wilsons Holdings Limited's (LON:OCN) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Ocean Wilsons Holdings

How Do Unusual Items Influence Profit?

For anyone who wants to understand Ocean Wilsons Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from US$31m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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).

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 Ocean Wilsons Holdings' Profit Performance

Arguably, Ocean Wilsons Holdings' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Ocean Wilsons Holdings' statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for Ocean Wilsons Holdings you should know about.

This note has only looked at a single factor that sheds light on the nature of Ocean Wilsons Holdings' 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 that insiders are buying 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.