Clean Harbors, Inc.'s (NYSE:CLH) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.
The Impact Of Unusual Items On Profit
To properly understand Clean Harbors' profit results, we need to consider the US$39m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Clean Harbors doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Clean Harbors' Profit Performance
Arguably, Clean Harbors' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Clean Harbors' true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 38% per annum growth in EPS for the last three. 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 Clean Harbors at this point in time. For example, Clean Harbors has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.
Today we've zoomed in on a single data point to better understand the nature of Clean Harbors' 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. 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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