Here's Why We Think Marsden Maritime Holdings's (NZSE:MMH) Statutory Earnings Might Be Conservative

Broadly speaking, profitable businesses are less risky than unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing Marsden Maritime Holdings (NZSE:MMH).

We like the fact that Marsden Maritime Holdings made a profit of NZ$6.68m on its revenue of NZ$6.18m, in the last year. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

View our latest analysis for Marsden Maritime Holdings

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Marsden Maritime Holdings' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Marsden Maritime Holdings.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Marsden Maritime Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by NZ$3.0m 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. In the twelve months to June 2020, Marsden Maritime Holdings had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Our Take On Marsden Maritime Holdings' Profit Performance

As we mentioned previously, the Marsden Maritime Holdings' profit was hampered by unusual items in the last year. Because of this, we think Marsden Maritime Holdings' underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To help with this, we've discovered 5 warning signs (1 is potentially serious!) that you ought to be aware of before buying any shares in Marsden Maritime Holdings.

Today we've zoomed in on a single data point to better understand the nature of Marsden Maritime 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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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