The market seemed underwhelmed by the solid earnings posted by BorgWarner Inc. (NYSE:BWA) recently. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

How Do Unusual Items Influence Profit?

To properly understand BorgWarner's profit results, we need to consider the US$249m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If BorgWarner 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 BorgWarner's Profit Performance

Because unusual items detracted from BorgWarner'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 BorgWarner's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 16% per year over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of BorgWarner.

Today we've zoomed in on a single data point to better understand the nature of BorgWarner's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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. 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.