Cutera's (NASDAQ:CUTR) Promising Earnings May Rest On Soft Foundations

By
Simply Wall St
Published
August 13, 2021
NasdaqGS:CUTR
Source: Shutterstock

Cutera, Inc. (NASDAQ:CUTR) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for Cutera

earnings-and-revenue-history
NasdaqGS:CUTR Earnings and Revenue History August 13th 2021

The Impact Of Unusual Items On Profit

For anyone who wants to understand Cutera's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from US$6.4m worth of 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. 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 that's as you'd expect, given these boosts are described as 'unusual'. Cutera had a rather significant contribution from unusual items relative to its profit to June 2021. 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 Cutera's Profit Performance

As we discussed above, we think the significant positive unusual item makes Cutera's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Cutera'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. 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. If you'd like to know more about Cutera as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Cutera you should be mindful of and 1 of these bad boys is a bit concerning.

Today we've zoomed in on a single data point to better understand the nature of Cutera's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.
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