SBM Offshore's (AMS:SBMO) Soft Earnings Don't Show The Whole Picture

Soft earnings didn't appear to concern SBM Offshore N.V.'s (AMS:SBMO) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for SBM Offshore

How Do Unusual Items Influence Profit?

For anyone who wants to understand SBM Offshore's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$79m 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, after all, that's exactly what the accounting terminology implies. If SBM Offshore 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 SBM Offshore's Profit Performance

Unusual items (expenses) detracted from SBM Offshore's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that SBM Offshore's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 4 warning signs we've spotted with SBM Offshore (including 1 which is a bit concerning).

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

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This article by Simply Wall St is general in nature. 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.
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