It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. That said, the current statutory profit is not always a good guide to a companys underlying profitability. Today well focus on whether this years statutory profits are a good guide to understanding Oceania Healthcare (NZSE:OCA).

Its good to see that over the last twelve months Oceania Healthcare made a profit of NZ$59.0m on revenue of NZ$190.7m. Happily, it has grown both its profit and revenue over the last three years, as you can see in the chart below.

See our latest analysis for Oceania Healthcare

Not all profits are equal, and we can learn more about the nature of a companys past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Oceania Healthcares 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.

Importantly, our data indicates that Oceania Healthcares profit received a boost of NZ$56m in unusual items, over the last year. While its always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and its very common for unusual items to be once-off in nature. And, after all, thats exactly what the accounting terminology implies. We can see that Oceania Healthcares positive unusual items were quite significant relative to its profit in the year to November 2019. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

As previously mentioned, Oceania Healthcares large boost from unusual items wont be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Oceania Healthcares statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that, its earnings per share increased by 65% in the last year. Of course, weve 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. Keep in mind, when it comes to analysing a stock its worth noting the risks involved. At Simply Wall St, we found 4 warning signs for Oceania Healthcare and we think they deserve your attention.

Today weve zoomed in on a single data point to better understand the nature of Oceania Healthcares 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. 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 that insiders are buying to be useful.

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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. 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. Thank you for reading.

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Oceania Healthcares (NZSE:OCA) Earnings Are Growing But Is There More To The Story? - Simply Wall St