Is There More To The Story Than United States Cellular's (NYSE:USM) Earnings Growth?

By
Simply Wall St
Published
November 03, 2020
NYSE:USM

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether United States Cellular's (NYSE:USM) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months United States Cellular made a profit of US$180.0m on revenue of US$4.02b. One positive is that it has grown both its profit and its revenue, over the last few years.

See our latest analysis for United States Cellular

earnings-and-revenue-history
NYSE:USM Earnings and Revenue History November 3rd 2020

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted United States Cellular'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 United States Cellular's profit results, we need to consider the US$23m 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 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 United States Cellular to produce a higher profit next year, all else being equal.

Our Take On United States Cellular's Profit Performance

Unusual items (expenses) detracted from United States Cellular's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that United States Cellular's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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 United States Cellular as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with United States Cellular (including 1 which is potentially serious).

Today we've zoomed in on a single data point to better understand the nature of United States Cellular'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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