Stock Analysis

Atmus Filtration Technologies' (NYSE:ATMU) Soft Earnings Don't Show The Whole Picture

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Investors were disappointed with the weak earnings posted by Atmus Filtration Technologies Inc. (NYSE:ATMU ). Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.

View our latest analysis for Atmus Filtration Technologies

NYSE:ATMU Earnings and Revenue History May 11th 2024

The Impact Of Unusual Items On Profit

To properly understand Atmus Filtration Technologies' profit results, we need to consider the US$27m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Atmus Filtration Technologies doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Atmus Filtration Technologies' Profit Performance

Unusual items (expenses) detracted from Atmus Filtration Technologies' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Atmus Filtration Technologies' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Atmus Filtration Technologies at this point in time. While conducting our analysis, we found that Atmus Filtration Technologies has 1 warning sign and it would be unwise to ignore this.

This note has only looked at a single factor that sheds light on the nature of Atmus Filtration Technologies' 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. 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.

Valuation is complex, but we're helping make it simple.

Find out whether Atmus Filtration Technologies is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.