Oil States International's (NYSE:OIS) Promising Earnings May Rest On Soft Foundations

Last week's profit announcement from Oil States International, Inc. (NYSE:OIS) was underwhelming for investors, despite headline numbers being robust. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

View our latest analysis for Oil States International

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Oil States International's profit received a boost of US$8.5m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Oil States International had a rather significant contribution from unusual items relative to its profit to March 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Oil States International's Profit Performance

As we discussed above, we think the significant positive unusual item makes Oil States International's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Oil States International'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 Oil States International, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Oil States International, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Oil States International'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. 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.