Investors were disappointed with Huntington Ingalls Industries, Inc.'s (NYSE:HII) earnings, despite the strong profit numbers. We did some digging and found some worrying underlying problems.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Huntington Ingalls Industries' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from US$143m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 surprising, given the name. If Huntington Ingalls Industries doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Huntington Ingalls Industries' Profit Performance

Arguably, Huntington Ingalls Industries' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Huntington Ingalls Industries' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 45% EPS growth in 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. If you'd like to know more about Huntington Ingalls Industries as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Huntington Ingalls Industries you should know about.

This note has only looked at a single factor that sheds light on the nature of Huntington Ingalls Industries' 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 with significant insider holdings to be useful.

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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.