Statutory Profit Doesn't Reflect How Good Richardson Electronics' (NASDAQ:RELL) Earnings Are

Even though Richardson Electronics, Ltd.'s (NASDAQ:RELL) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

See our latest analysis for Richardson Electronics

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Richardson Electronics' profit was reduced by US$1.6m, due to unusual items, over the last year. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Richardson Electronics to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Richardson Electronics.

Our Take On Richardson Electronics' Profit Performance

Unusual items (expenses) detracted from Richardson Electronics' earnings over the last year, but we might see an improvement next year. Because of this, we think Richardson Electronics' 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. 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 Richardson Electronics, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Richardson Electronics you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Richardson Electronics' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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. 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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