Bang & Olufsen (CPH:BO) Is Posting Promising Earnings But The Good News Doesn’t Stop There

The market seemed underwhelmed by last week's earnings announcement from Bang & Olufsen a/s (CPH:BO) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

Check out our latest analysis for Bang & Olufsen

The Impact Of Unusual Items On Profit

For anyone who wants to understand Bang & Olufsen's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by kr.25m 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Bang & Olufsen to produce a higher profit next year, all else being equal.

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 Bang & Olufsen's Profit Performance

Unusual items (expenses) detracted from Bang & Olufsen's earnings over the last year, but we might see an improvement next year. Because of this, we think Bang & Olufsen's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite 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 Bang & Olufsen at this point in time. While conducting our analysis, we found that Bang & Olufsen has 1 warning sign and it would be unwise to ignore it.

Today we've zoomed in on a single data point to better understand the nature of Bang & Olufsen'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.