There May Be Reason For Hope In MSC Industrial Direct's (NYSE:MSM) Disappointing Earnings

Shareholders appeared unconcerned with MSC Industrial Direct Co., Inc.'s (NYSE:MSM) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

Check out our latest analysis for MSC Industrial Direct

The Impact Of Unusual Items On Profit

Importantly, our data indicates that MSC Industrial Direct's profit was reduced by US$74m, due to unusual items, over the last year. 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 MSC Industrial Direct 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 MSC Industrial Direct's Profit Performance

Unusual items (expenses) detracted from MSC Industrial Direct's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that MSC Industrial Direct's 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 MSC Industrial Direct at this point in time. In terms of investment risks, we've identified 3 warning signs with MSC Industrial Direct, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of MSC Industrial Direct's 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. 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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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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