Nexa Resources' (NYSE:NEXA) Robust Earnings Are Supported By Other Strong Factors

The subdued stock price reaction suggests that Nexa Resources S.A.'s (NYSE:NEXA) strong earnings didn't offer any surprises. We think that investors have missed some encouraging factors underlying the profit figures.

Check out our latest analysis for Nexa Resources

How Do Unusual Items Influence Profit?

For anyone who wants to understand Nexa Resources' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$68m due to unusual items. 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 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 Nexa Resources 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 Nexa Resources' Profit Performance

Unusual items (expenses) detracted from Nexa Resources' earnings over the last year, but we might see an improvement next year. Because of this, we think Nexa Resources' earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Nexa Resources, you'd also look into what risks it is currently facing. Our analysis shows 4 warning signs for Nexa Resources (1 is a bit unpleasant!) and we strongly recommend you look at these bad boys before investing.

Today we've zoomed in on a single data point to better understand the nature of Nexa Resources' 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. 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.

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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.
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