The stock price didn't jump after Atlantica Sustainable Infrastructure plc (NASDAQ:AY) posted decent earnings last week. We think that investors might be worried about some concerning underlying factors.
See our latest analysis for Atlantica Sustainable Infrastructure
How Do Unusual Items Influence Profit?
For anyone who wants to understand Atlantica Sustainable Infrastructure's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from US$25m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).
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 Atlantica Sustainable Infrastructure's Profit Performance
Arguably, Atlantica Sustainable Infrastructure's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Atlantica Sustainable Infrastructure's statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. If you'd like to know more about Atlantica Sustainable Infrastructure as a business, it's important to be aware of any risks it's facing. Be aware that Atlantica Sustainable Infrastructure is showing 3 warning signs in our investment analysis and 1 of those is significant...
This note has only looked at a single factor that sheds light on the nature of Atlantica Sustainable Infrastructure'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. 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.