Are Comstock Holding Companies's (NASDAQ:CHCI) Statutory Earnings A Good Reflection Of Its Earnings Potential?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. That said, the current statutory profit is not always a good guide to a company's underlying profitability. Today we'll focus on whether this year's statutory profits are a good guide to understanding Comstock Holding Companies (NASDAQ:CHCI).

While Comstock Holding Companies was able to generate revenue of US$30.2m in the last twelve months, we think its profit result of US$3.24m was more important. The chart below shows that while revenue has fallen over the last three years, the company has moved from unprofitable to profitable.

View our latest analysis for Comstock Holding Companies

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on Comstock Holding Companies' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Comstock Holding Companies.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Comstock Holding Companies' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$560k 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Comstock Holding Companies to produce a higher profit next year, all else being equal.

Our Take On Comstock Holding Companies' Profit Performance

Because unusual items detracted from Comstock Holding Companies' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Comstock Holding Companies' earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Comstock Holding Companies you should know about.

Today we've zoomed in on a single data point to better understand the nature of Comstock Holding Companies' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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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