Stock Analysis

Steel & Tube Holdings' (NZSE:STU) Promising Earnings May Rest On Soft Foundations

NZSE:STU
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Steel & Tube Holdings Limited's (NZSE:STU) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for Steel & Tube Holdings

earnings-and-revenue-history
NZSE:STU Earnings and Revenue History August 31st 2021

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Steel & Tube Holdings' profit received a boost of NZ$1.9m in unusual items, over the last year. 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. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Steel & Tube Holdings' Profit Performance

Arguably, Steel & Tube Holdings' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Steel & Tube Holdings' statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Steel & Tube Holdings and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Steel & Tube Holdings' 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 that insiders are buying.

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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.
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