Stock Analysis

We Think ArcelorMittal South Africa's (JSE:ACL) Healthy Earnings Might Be Conservative

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The stock was sluggish on the back of ArcelorMittal South Africa Ltd's (JSE:ACL) recent earnings report. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

View our latest analysis for ArcelorMittal South Africa

JSE:ACL Earnings and Revenue History August 5th 2021

The Impact Of Unusual Items On Profit

To properly understand ArcelorMittal South Africa's profit results, we need to consider the R410m 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect ArcelorMittal South Africa to produce a higher profit next year, all else being equal.

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.

Our Take On ArcelorMittal South Africa's Profit Performance

Unusual items (expenses) detracted from ArcelorMittal South Africa's earnings over the last year, but we might see an improvement next year. Because of this, we think ArcelorMittal South Africa's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite 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'd like to know more about ArcelorMittal South Africa as a business, it's important to be aware of any risks it's facing. For example, ArcelorMittal South Africa has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of ArcelorMittal South Africa'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. 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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