We Think Astec Industries' (NASDAQ:ASTE) Profit Is Only A Baseline For What They Can Achieve

Even though Astec Industries, Inc.'s (NASDAQ:ASTE) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Astec Industries' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$30m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. 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 Astec Industries 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 Astec Industries' Profit Performance

Unusual items (expenses) detracted from Astec Industries' earnings over the last year, but we might see an improvement next year. Because of this, we think Astec Industries' earnings potential is at least as good as it seems, and maybe even better! And it's also positive that 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. So while earnings quality is important, it's equally important to consider the risks facing Astec Industries at this point in time. Case in point: We've spotted 2 warning signs for Astec Industries you should be mindful of and 1 of these doesn't sit too well with us.

Today we've zoomed in on a single data point to better understand the nature of Astec Industries' 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 with significant insider holdings to be useful.

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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.