We Think That There Are Issues Underlying Stolt-Nielsen's (OB:SNI) Earnings

Stolt-Nielsen Limited's (OB:SNI) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

View our latest analysis for Stolt-Nielsen

How Do Unusual Items Influence Profit?

For anyone who wants to understand Stolt-Nielsen's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from US$11m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Stolt-Nielsen doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Stolt-Nielsen's Profit Performance

Arguably, Stolt-Nielsen's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Stolt-Nielsen's true underlying earnings power is actually less than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. If you want to do dive deeper into Stolt-Nielsen, you'd also look into what risks it is currently facing. For instance, we've identified 2 warning signs for Stolt-Nielsen (1 is concerning) you should be familiar with.

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

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.

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