Alkermes' (NASDAQ:ALKS) Earnings May Just Be The Starting Point

Even though Alkermes plc's (NASDAQ:ALKS) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

See our latest analysis for Alkermes

The Impact Of Unusual Items On Profit

For anyone who wants to understand Alkermes' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$6.0b due 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, after all, that's exactly what the accounting terminology implies. Alkermes took a rather significant hit from unusual items in the year to September 2023. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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 Alkermes' Profit Performance

As we mentioned previously, the Alkermes' profit was hampered by unusual items in the last year. Because of this, we think Alkermes' underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. If you want to do dive deeper into Alkermes, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Alkermes, and understanding it should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Alkermes' 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 that insiders are buying.

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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.