Does Acushnet Holdings's (NYSE:GOLF) Statutory Profit Adequately Reflect Its Underlying Profit?

By
Simply Wall St
Published
November 06, 2020
NYSE:GOLF

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 Acushnet Holdings (NYSE:GOLF).

While Acushnet Holdings was able to generate revenue of US$1.49b in the last twelve months, we think its profit result of US$58.8m was more important. Below, you can see that both its revenue and its profit have fallen over the last three years.

Check out our latest analysis for Acushnet Holdings

earnings-and-revenue-history
NYSE:GOLF Earnings and Revenue History November 6th 2020

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Acushnet Holdings' statutory earnings. 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.

How Do Unusual Items Influence Profit?

To properly understand Acushnet Holdings' profit results, we need to consider the US$18m 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 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 Acushnet Holdings to produce a higher profit next year, all else being equal.

Our Take On Acushnet Holdings' Profit Performance

Unusual items (expenses) detracted from Acushnet Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Acushnet Holdings' statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back 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 4 warning signs for Acushnet Holdings (of which 1 is potentially serious!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Acushnet Holdings' 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. 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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