EPAM Systems' (NYSE:EPAM) Conservative Accounting Might Explain Soft Earnings

The market was pleased with the recent earnings report from EPAM Systems, Inc. (NYSE:EPAM), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

We've discovered 1 warning sign about EPAM Systems. View them for free.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that EPAM Systems' profit was reduced by US$62m, 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. 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 EPAM Systems 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 EPAM Systems' Profit Performance

Unusual items (expenses) detracted from EPAM Systems' earnings over the last year, but we might see an improvement next year. Because of this, we think EPAM Systems' 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. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - EPAM Systems has 1 warning sign we think you should be aware of.

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