Stock Analysis
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- NasdaqCM:OESX
Should You Use Orion Energy Systems's (NASDAQ:OESX) Statutory Earnings To Analyse It?
Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. This article will consider whether Orion Energy Systems' (NASDAQ:OESX) statutory profits are a good guide to its underlying earnings.
We like the fact that Orion Energy Systems made a profit of US$1.47m on its revenue of US$97.2m, in the last year. The good news is that the company managed to grow its revenue over the last three years, and also move from loss-making to profitable.
See our latest analysis for Orion Energy Systems
Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will discuss how unusual items have impacted Orion Energy Systems' most recent profit results. 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.
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Orion Energy Systems' profit was reduced by US$391k, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Orion Energy Systems doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
Our Take On Orion Energy Systems' Profit Performance
Because unusual items detracted from Orion Energy Systems' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Orion Energy Systems' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 3 warning signs with Orion Energy Systems, and understanding them should be part of your investment process.
Today we've zoomed in on a single data point to better understand the nature of Orion Energy Systems' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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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What are the risks and opportunities for Orion Energy Systems?
Orion Energy Systems, Inc. researches, designs, develops, manufactures, markets, sells, installs, and implements energy management systems for commercial office and retail, exterior area lighting, and industrial applications in North America.
Rewards
Earnings are forecast to grow 71.47% per year
Risks
Does not have a meaningful market cap ($59M)
Shareholders have been diluted in the past year
Further research on
Orion Energy Systems
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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About NasdaqCM:OESX
Orion Energy Systems
Orion Energy Systems, Inc. researches, designs, develops, manufactures, markets, sells, installs, and implements energy management systems for commercial office and retail, exterior area lighting, and industrial applications in North America.
High growth potential with adequate balance sheet.
