We Think Signify's (AMS:LIGHT) Solid Earnings Are Understated

The stock was sluggish on the back of Signify N.V.'s (AMS:LIGHT) recent earnings report. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

Check out our latest analysis for Signify

How Do Unusual Items Influence Profit?

To properly understand Signify's profit results, we need to consider the €55m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Signify 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 Signify's Profit Performance

Because unusual items detracted from Signify's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Signify's statutory profit actually understates its earnings potential! And the EPS is up 61% over the last twelve months. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Signify you should know about.

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