We Think Enerpac Tool Group's (NYSE:EPAC) Robust Earnings Are Conservative

Enerpac Tool Group Corp.'s (NYSE:EPAC) strong earnings report was rewarded with a positive stock price move. Our analysis found some more factors that we think are good for shareholders.

Check out our latest analysis for Enerpac Tool Group

The Impact Of Unusual Items On Profit

For anyone who wants to understand Enerpac Tool Group's 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 Enerpac Tool Group 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 Enerpac Tool Group's Profit Performance

Unusual items (expenses) detracted from Enerpac Tool Group's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Enerpac Tool Group's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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 Enerpac Tool Group at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Enerpac Tool Group.

This note has only looked at a single factor that sheds light on the nature of Enerpac Tool Group's 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. 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. 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.