Louisiana-Pacific's (NYSE:LPX) Soft Earnings Don't Show The Whole Picture

Louisiana-Pacific Corporation's (NYSE:LPX) earnings announcement last week didn't impress shareholders. However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Louisiana-Pacific's profit was reduced by US$42m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Louisiana-Pacific doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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 Louisiana-Pacific's Profit Performance

Because unusual items detracted from Louisiana-Pacific's 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 Louisiana-Pacific's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. In terms of investment risks, we've identified 1 warning sign with Louisiana-Pacific, and understanding it should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Louisiana-Pacific's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.