Nice's (TSE:8089) Soft Earnings Don't Show The Whole Picture

The market for Nice Corporation's (TSE:8089) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Nice

How Do Unusual Items Influence Profit?

For anyone who wants to understand Nice's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥1.5b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Nice to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Nice.

Our Take On Nice's Profit Performance

Because unusual items detracted from Nice'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 Nice's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over 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. If you want to do dive deeper into Nice, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 3 warning signs with Nice, and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Nice's profit. But there are plenty of other ways to inform your opinion of a company. 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 with high insider ownership.

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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.