Ball's (NYSE:BALL) Performance Is Even Better Than Its Earnings Suggest

Ball Corporation (NYSE:BALL) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Ball's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$160m due 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 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 Ball to produce a higher profit next year, all else being equal.

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 Ball's Profit Performance

Unusual items (expenses) detracted from Ball's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Ball's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 48% in 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. So while earnings quality is important, it's equally important to consider the risks facing Ball at this point in time. When we did our research, we found 2 warning signs for Ball (1 is concerning!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Ball'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.