In This Article:
Koninklijke Philips N.V.'s (AMS:PHIA) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Koninklijke Philips' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €446m due 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 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 Koninklijke Philips 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 Koninklijke Philips' Profit Performance
Because unusual items detracted from Koninklijke Philips' 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 Koninklijke Philips' statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. 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 want to do dive deeper into Koninklijke Philips, you'd also look into what risks it is currently facing. Our analysis shows 3 warning signs for Koninklijke Philips (2 shouldn't be ignored!) and we strongly recommend you look at them before investing.
Today we've zoomed in on a single data point to better understand the nature of Koninklijke Philips' 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.
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.