We Think That There Are Issues Underlying Northern Technologies International's (NASDAQ:NTIC) Earnings

By
Simply Wall St
Published
January 23, 2022
NasdaqGM:NTIC
Source: Shutterstock

Northern Technologies International Corporation's (NASDAQ:NTIC) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for Northern Technologies International

earnings-and-revenue-history
NasdaqGM:NTIC Earnings and Revenue History January 23rd 2022

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Northern Technologies International's profit received a boost of US$4.0m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Northern Technologies International had a rather significant contribution from unusual items relative to its profit to November 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 Northern Technologies International's Profit Performance

As previously mentioned, Northern Technologies International's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Northern Technologies 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that Northern Technologies International has 3 warning signs and it would be unwise to ignore them.

Today we've zoomed in on a single data point to better understand the nature of Northern Technologies International'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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