Science Applications International Corporation's (NASDAQ:SAIC ) stock didn't jump after it announced some healthy earnings. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Science Applications International's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from US$209m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. Science Applications International had a rather significant contribution from unusual items relative to its profit to May 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.
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 Science Applications International's Profit Performance
As we discussed above, we think the significant positive unusual item makes Science Applications International's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Science Applications International's underlying earnings power is lower than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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 want to do dive deeper into Science Applications International, you'd also look into what risks it is currently facing. For instance, we've identified 3 warning signs for Science Applications International (2 shouldn't be ignored) you should be familiar with.
This note has only looked at a single factor that sheds light on the nature of Science Applications International's 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.
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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.