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Concerns About Kewaunee Scientific’s (NASDAQ:KEQU) Performance

After solid earnings report Kewaunee Scientific Corporation (NASDAQ:KEQU), the market responded by increasing the stock price. However, we think shareholders should be careful as we found some worrying factors underlying the profit.

Check out our latest analysis for Kewaunee Scientific

NasdaqGM:KEQU Earnings and Revenue History July 11, 2024

An Unusual Tax Situation

Kewaunee Scientific reported a tax benefit of $5.9 million, which is significant. This makes sense because companies typically pay taxes rather than receive tax benefits. We are confident that the company is happy with the tax benefit. However, our data suggests that tax benefits can temporarily increase statutory profits in the year they are recorded, but then decline in profits. Assuming that the tax benefit does not repeat itself every year, we can see that its profitability, all else being equal, has decreased significantly.

Note: We always recommend investors check its balance sheet strength. Click here to visit our balance sheet analysis of Kewaunee Scientific.

Our View of Kewaunee Scientific’s Profit Performance

As we’ve discussed before, Kewaunee Scientific reported that it received a tax benefit instead of paying taxes last year. Given that such a benefit is not recurring, focusing on statutory profits can make the company look better than it actually is. Therefore, we think Kewaunee Scientific’s statutory profits may be better than its underlying earnings power. But the good news is that while we recognize that we need to look beyond the statutory numbers, those numbers are still improving, and EPS grew at a very high rate last year. Of course, we’ve only just scratched the surface when it comes to analyzing its earnings; margins, projected growth, and return on investment can also be taken into account, among other factors. Just as investors should consider earnings, it’s also important to consider the strength of a company’s balance sheet. We have a graphical representation of Kewaunee Scientific’s balance sheet if you’re interested.

This note has looked at just one factor that sheds light on the nature of Kewaunee Scientific’s profits. But if you can focus your mind on the details, there’s always more to discover. Some people consider a high return on equity to be a good sign of a quality business, so you might want to look at this free a collection of companies that generate high returns on equity or a list of stocks with high insider ownership.

Valuation is complex, but we help simplify it.

Check out our comprehensive analysis to find out whether Kewaunee Scientific is potentially overvalued or undervalued. fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View Free Analysis

Have feedback about this article? Concerns about the content? Keep in touch contact us directly. Alternatively, you can email editorial-team (at) simplywallst.com.

This article from Simply Wall St is general in nature. We provide commentary based solely on historical data and analyst estimates 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 security and does not take into account your objectives, or your financial situation. We aim to provide long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in the stocks mentioned.

Valuation is complex, but we help simplify it.

Check out our comprehensive analysis to find out whether Kewaunee Scientific is potentially overvalued or undervalued. fair value estimates, risks and warnings, dividends, insider information and financial health.

View Free Analysis

Have feedback about this article? Concerned about the content? Contact us directly. Alternatively, email [email protected].