We Think World Kinect's (NYSE:WKC) Healthy Earnings Might Be Conservative
Shareholders appeared to be happy with World Kinect Corporation's (NYSE:WKC) solid earnings report last week. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals.
View our latest analysis for World Kinect
For anyone who wants to understand World Kinect's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$51m due 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 World Kinect 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.
Unusual items (expenses) detracted from World Kinect's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that World Kinect's statutory profit actually understates its earnings potential! And the EPS is up 33% over the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - World Kinect has 1 warning sign we think you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of World Kinect's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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 with significant insider holdings to be useful.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
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