Are Jabil's (NYSE:JBL) Statutory Earnings A Good Guide To Its Underlying Profitability?

By
Simply Wall St
Published
February 04, 2021
NYSE:JBL

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing Jabil (NYSE:JBL).

While Jabil was able to generate revenue of US$27.6b in the last twelve months, we think its profit result of US$213.9m was more important. Happily, it has grown both its profit and revenue over the last three years, as you can see in the chart below.

View our latest analysis for Jabil

earnings-and-revenue-history
NYSE:JBL Earnings and Revenue History February 4th 2021

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Jabil's statutory earnings. 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 Jabil's profit results, we need to consider the US$217m expense attributed 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. If Jabil doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Jabil's Profit Performance

Unusual items (expenses) detracted from Jabil's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Jabil's statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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 Jabil as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 3 warning signs for Jabil and you'll want to know about these bad boys.

This note has only looked at a single factor that sheds light on the nature of Jabil's 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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