Investors Can Find Comfort In Leonardo's (BIT:LDO) Earnings Quality

Leonardo S.p.a.'s (BIT:LDO) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

View our latest analysis for Leonardo

The Impact Of Unusual Items On Profit

For anyone who wants to understand Leonardo's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €261m 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 that's hardly a surprise given these line items are considered unusual. If Leonardo 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 Leonardo's Profit Performance

Because unusual items detracted from Leonardo's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Leonardo's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 49% per year over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into Leonardo, you'd also look into what risks it is currently facing. For example - Leonardo has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Leonardo's profit. But there are plenty of other ways to inform your opinion of a company. 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.