Shareholders appeared unconcerned with TriNet Group, Inc.'s (NYSE:TNET) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.
We've discovered 2 warning signs about TriNet Group. View them for free.
How Do Unusual Items Influence Profit?
Importantly, our data indicates that TriNet Group's profit was reduced by US$24m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If TriNet Group doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
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 TriNet Group's Profit Performance
Unusual items (expenses) detracted from TriNet Group's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that TriNet Group's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the 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. So while earnings quality is important, it's equally important to consider the risks facing TriNet Group at this point in time. In terms of investment risks, we've identified 2 warning signs with TriNet Group, and understanding these should be part of your investment process.
Today we've zoomed in on a single data point to better understand the nature of TriNet Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.