We Think Ball's (NYSE:BALL) Solid Earnings Are Understated

The market seemed underwhelmed by last week's earnings announcement from Ball Corporation (NYSE:BALL) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

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The Impact Of Unusual Items On Profit

To properly understand Ball's profit results, we need to consider the US$373m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. 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 the EPS is up 28% over the last twelve months. 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 want to do dive deeper into Ball, you'd also look into what risks it is currently facing. For example, Ball has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Ball's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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 with significant insider holdings 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.