Shareholders appeared to be happy with American Axle & Manufacturing Holdings, Inc.'s (NYSE:AXL) solid earnings report last week. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers.

See our latest analysis for American Axle & Manufacturing Holdings

How Do Unusual Items Influence Profit?

Importantly, our data indicates that American Axle & Manufacturing Holdings' profit was reduced by US$31m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If American Axle & Manufacturing Holdings 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 American Axle & Manufacturing Holdings' Profit Performance

Unusual items (expenses) detracted from American Axle & Manufacturing Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that American Axle & Manufacturing Holdings' statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing American Axle & Manufacturing Holdings at this point in time. To that end, you should learn about the 2 warning signs we've spotted with American Axle & Manufacturing Holdings (including 1 which is a bit concerning).

This note has only looked at a single factor that sheds light on the nature of American Axle & Manufacturing Holdings' 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 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.