Broadly speaking, profitable businesses are less risky than 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. Today we’ll focus on whether this year’s statutory profits are a good guide to understanding Itron (NASDAQ:ITRI).
We like the fact that Itron made a profit of US$49.0m on its revenue of US$2.50b, in the last year.
Importantly, statutory profits are not always the best tool for understanding a company’s true earnings power, so it’s well worth examining profits in a little more detail. This article will discuss how unusual items have impacted Itron’s most recent profit results. 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.
The Impact Of Unusual Items On Profit
To properly understand Itron’s profit results, we need to consider the US$33m expense attributed 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 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 Itron to produce a higher profit next year, all else being equal.
Our Take On Itron’s Profit Performance
Because unusual items detracted from Itron’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 Itron’s 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’d like to know more about Itron as a business, it’s important to be aware of any risks it’s facing. To help with this, we’ve discovered 3 warning signs (1 is significant!) that you ought to be aware of before buying any shares in Itron.
This note has only looked at a single factor that sheds light on the nature of Itron’s profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to ‘follow the money’ and search out stocks that insiders are buying. 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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