The market seemed underwhelmed by the solid earnings posted by Tetra Tech, Inc. (NASDAQ:TTEK) recently. Along with the solid headline numbers, we think that investors have some reasons for optimism.

View our latest analysis for Tetra Tech

The Impact Of Unusual Items On Profit

For anyone who wants to understand Tetra Tech's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$125m due to unusual items. 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 Tetra Tech 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 Tetra Tech's Profit Performance

Unusual items (expenses) detracted from Tetra Tech's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Tetra Tech's statutory profit actually understates its earnings potential! And the EPS is up 5.5% annually, over the last three years. 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. If you want to do dive deeper into Tetra Tech, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Tetra Tech and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Tetra Tech'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 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.