Air Industries Group's (NYSEMKT:AIRI) Solid Earnings May Rest On Weak Foundations

The recent earnings posted by Air Industries Group (NYSEMKT:AIRI) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

Check out our latest analysis for Air Industries Group

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Air Industries Group's profit received a boost of US$2.5m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that Air Industries Group's positive unusual items were quite significant relative to its profit in the year to December 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 Air Industries Group's Profit Performance

As we discussed above, we think the significant positive unusual item makes Air Industries Group's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Air Industries Group's underlying earnings power is lower than its statutory profit. On the bright side, 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. If you want to do dive deeper into Air Industries Group, you'd also look into what risks it is currently facing. Case in point: We've spotted 5 warning signs for Air Industries Group you should be mindful of and 1 of these is a bit concerning.

This note has only looked at a single factor that sheds light on the nature of Air Industries Group'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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