As a general rule, we think profitable companies are less risky than companies that lose money. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. In this article, we’ll look at how useful this year’s statutory profit is, when analysing GATX (NYSE:GATX).
We like the fact that GATX made a profit of US$203.8m on its revenue of US$1.39b, in the last year. The chart below shows that both revenue and profit have declined over the last three years.
Check out our latest analysis for GATX
Importantly, statutory profits are not always the best tool for understanding a company’s true earnings power, so it’s well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on GATX’s statutory earnings. 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.
The Impact Of Unusual Items On Profit
For anyone who wants to understand GATX’s profit beyond the statutory numbers, it’s important to note that during the last twelve months statutory profit gained from US$46m 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly suprising, given the name. If GATX doesn’t see that contribution repeat, then all else being equal we’d expect its profit to drop over the current year.
Our Take On GATX’s Profit Performance
Arguably, GATX’s statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that GATX’s statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the 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. Ultimately, this article has formed an opinion based on historical data. However, it can also be great to think about what analysts are forecasting for the future. So feel free to check out our free graph representing analyst forecasts.
This note has only looked at a single factor that sheds light on the nature of GATX’s 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 that insiders are buying.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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January 01, 2020 at 02:10AM
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Does GATX’s (NYSE:GATX) Statutory Profit Adequately Reflect Its Underlying Profit? - Simply Wall St
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