Are TFF Group’s (EPA:TFF) Statutory Earnings A Good Reflection Of Its Earnings Potential?

Broadly speaking, profitable businesses are less risky than unprofitable ones. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it’s not always clear whether statutory profits are a good guide, going forward. In this article, we’ll look at how useful this year’s statutory profit is, when analysing TFF Group (EPA:TFF).

We like the fact that TFF Group made a profit of €27.0m on its revenue of €282.7m, in the last year. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

View our latest analysis for TFF Group

ENXTPA:TFF Income Statement May 26th 2020
ENXTPA:TFF Income Statement May 26th 2020

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted TFF Group’s most recent profit results. 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.

How Do Unusual Items Influence Profit?

For anyone who wants to understand TFF Group’s profit beyond the statutory numbers, it’s important to note that during the last twelve months statutory profit was reduced by €8.4m due 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 TFF Group doesn’t see those unusual expenses repeat, then all else being equal we’d expect its profit to increase over the coming year.

Our Take On TFF Group’s Profit Performance

Because unusual items detracted from TFF Group’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 TFF Group’s earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. 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. With this in mind, we wouldn’t consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that TFF Group has 1 warning sign and it would be unwise to ignore this.

This note has only looked at a single factor that sheds light on the nature of TFF Group’s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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. Thank you for reading.