Eastman Kodak's (NYSE:KODK) Solid Earnings Have Been Accounted For Conservatively

Despite posting healthy earnings, Eastman Kodak Company's (NYSE:KODK ) stock has been quite weak. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

See our latest analysis for Eastman Kodak

The Impact Of Unusual Items On Profit

To properly understand Eastman Kodak's profit results, we need to consider the US$28m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Eastman Kodak 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 Eastman Kodak.

Our Take On Eastman Kodak's Profit Performance

Because unusual items detracted from Eastman Kodak's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Eastman Kodak's statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS over the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Eastman Kodak as a business, it's important to be aware of any risks it's facing. For example, we've found that Eastman Kodak has 2 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Eastman Kodak's 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. 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. 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.