Sealed Air's (NYSE:SEE) Soft Earnings Don't Show The Whole Picture

The market was pleased with the recent earnings report from Sealed Air Corporation (NYSE:SEE), despite the profit numbers being soft. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

Our free stock report includes 1 warning sign investors should be aware of before investing in Sealed Air. Read for free now.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Sealed Air's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$91m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Sealed Air 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 Sealed Air's Profit Performance

Because unusual items detracted from Sealed Air's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Sealed Air's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with Sealed Air, 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 Sealed Air'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.