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The market seemed underwhelmed by last week's earnings announcement from AstraZeneca PLC (LON:AZN) despite the healthy numbers. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.
The Impact Of Unusual Items On Profit
For anyone who wants to understand AstraZeneca's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$3.1b 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 AstraZeneca 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 AstraZeneca's Profit Performance
Unusual items (expenses) detracted from AstraZeneca's earnings over the last year, but we might see an improvement next year. Because of this, we think AstraZeneca's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 23% over the last twelve months. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 2 warning signs for AstraZeneca you should know about.
Today we've zoomed in on a single data point to better understand the nature of AstraZeneca'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 with high insider ownership.
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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.