Investors Can Find Comfort In Landsea Homes' (NASDAQ:LSEA) Earnings Quality

The market was pleased with the recent earnings report from Landsea Homes Corporation (NASDAQ:LSEA), despite the profit numbers being soft. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for Landsea Homes

The Impact Of Unusual Items On Profit

To properly understand Landsea Homes' profit results, we need to consider the US$21m expense attributed 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. If Landsea Homes doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Landsea Homes' Profit Performance

Unusual items (expenses) detracted from Landsea Homes' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Landsea Homes' statutory profit actually understates its earnings potential! And the EPS is up 24% annually, over the last three years. 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. To help with this, we've discovered 4 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in Landsea Homes.

This note has only looked at a single factor that sheds light on the nature of Landsea Homes' 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 with high insider ownership.

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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.