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Lucara Diamond Corp.'s (TSE:LUC) strong earnings report was rewarded with a positive stock price move. We have done some analysis, and we found several positive factors beyond the profit numbers.
See our latest analysis for Lucara Diamond
The Impact Of Unusual Items On Profit
For anyone who wants to understand Lucara Diamond's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$11m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Lucara Diamond doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Lucara Diamond.
Our Take On Lucara Diamond's Profit Performance
Because unusual items detracted from Lucara Diamond's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Lucara Diamond's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. 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 Lucara Diamond as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Lucara Diamond has 1 warning sign and it would be unwise to ignore this.
This note has only looked at a single factor that sheds light on the nature of Lucara Diamond'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 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.