Are Cooper Companies' (NYSE:COO) Statutory Earnings A Good Guide To Its Underlying Profitability?

By
Simply Wall St
Published
February 12, 2021
NYSE:COO

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. This article will consider whether Cooper Companies' (NYSE:COO) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Cooper Companies made a profit of US$238.4m on revenue of US$2.43b. As you can see in the chart below, its profit has declined over the last three years, even though its revenue has increased.

See our latest analysis for Cooper Companies

earnings-and-revenue-history
NYSE:COO Earnings and Revenue History February 12th 2021

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 Cooper Companies' 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 Cooper Companies' profit results, we need to consider the US$90m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Cooper Companies to produce a higher profit next year, all else being equal.

Our Take On Cooper Companies' Profit Performance

Because unusual items detracted from Cooper Companies' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Cooper Companies' statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the 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'd like to know more about Cooper Companies as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Cooper Companies has 3 warning signs and it would be unwise to ignore them.

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

Promoted
If you’re looking to trade Cooper Companies, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.


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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is a financial technology startup focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of equity analysts with a public, market-beating track record. Learn more about the team behind Simply Wall St.