Are New England Realty Associates Limited Partnership's (NYSEMKT:NEN) Statutory Earnings A Good Reflection Of Its Earnings Potential?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether New England Realty Associates Limited Partnership's (NYSEMKT:NEN) statutory profits are a good guide to its underlying earnings.

We like the fact that New England Realty Associates Limited Partnership made a profit of US$4.29m on its revenue of US$63.8m, in the last year. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

Check out our latest analysis for New England Realty Associates Limited Partnership

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of New England Realty Associates Limited Partnership.

Our Take On New England Realty Associates Limited Partnership's Profit Performance

Therefore, it seems possible to us that New England Realty Associates Limited Partnership's true underlying earnings power is actually less than its statutory profit. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 3 warning signs for New England Realty Associates Limited Partnership you should be mindful of and 1 of these doesn't sit too well with us.

In this article we've looked at a number of factors that can impair the utility of profit numbers, as a guide to a business. 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. 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 that insiders are buying to be useful.

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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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