Investors Can Find Comfort In Apogee Enterprises' (NASDAQ:APOG) Earnings Quality

Investors were disappointed with the weak earnings posted by Apogee Enterprises, Inc. (NASDAQ:APOG ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Apogee Enterprises' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$22m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If Apogee Enterprises doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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 Apogee Enterprises' Profit Performance

Unusual items (expenses) detracted from Apogee Enterprises' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Apogee Enterprises' statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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. So while earnings quality is important, it's equally important to consider the risks facing Apogee Enterprises at this point in time. Case in point: We've spotted 1 warning sign for Apogee Enterprises you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Apogee Enterprises' 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 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.