Are Stara Planina Hold's (BUL:5SR) Statutory Earnings A Good Reflection Of Its Earnings Potential?

As a general rule, we think profitable companies are less risky than companies that lose money. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. In this article, we'll look at how useful this year's statutory profit is, when analysing Stara Planina Hold (BUL:5SR).

It's good to see that over the last twelve months Stara Planina Hold made a profit of лв6.39m on revenue of лв218.4m. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

Check out our latest analysis for Stara Planina Hold

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Stara Planina Hold's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Stara Planina Hold.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Stara Planina Hold's profit was reduced by лв2.5m, 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Stara Planina Hold to produce a higher profit next year, all else being equal.

Our Take On Stara Planina Hold's Profit Performance

Because unusual items detracted from Stara Planina Hold'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 Stara Planina Hold's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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'd like to know more about Stara Planina Hold as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Stara Planina Hold you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Stara Planina Hold'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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