Valmont Industries, Inc.'s (NYSE:VMI) stock was strong despite it releasing a soft earnings report last week. However, we think the company is showing some signs that things are more promising than they seem.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Valmont Industries' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$174m 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, after all, that's exactly what the accounting terminology implies. If Valmont Industries 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 Valmont Industries' Profit Performance

Because unusual items detracted from Valmont Industries' 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 Valmont Industries' statutory profit actually understates its earnings potential! And we are pleased to note that EPS is at least heading in the right direction over the last three years. 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 Valmont Industries as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Valmont Industries, and understanding them should be part of your investment process.

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