Does Atos’s (EPA:ATO) Statutory Profit Adequately Reflect Its Underlying Profit?

As a general rule, we think profitable companies are less risky than companies that lose money. That said, the current statutory profit is not always a good guide to a company’s underlying profitability. Today we’ll focus on whether this year’s statutory profits are a good guide to understanding Atos (EPA:ATO).

We like the fact that Atos made a profit of €561.0m on its revenue of €11.5b, in the last year. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

See our latest analysis for Atos

earnings-and-revenue-history
ENXTPA:ATO Earnings and Revenue History August 31st 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 Atos’ 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 Atos’ profit beyond the statutory numbers, it’s important to note that during the last twelve months statutory profit was reduced by €141.0m 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. Assuming those unusual expenses don’t come up again, we’d therefore expect Atos to produce a higher profit next year, all else being equal.

Our Take On Atos’ Profit Performance

Because unusual items detracted from Atos’ earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Atos’ earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 29% over 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. In light of this, if you’d like to do more analysis on the company, it’s vital to be informed of the risks involved. You’d be interested to know, that we found 1 warning sign for Atos and you’ll want to know about this.

This note has only looked at a single factor that sheds light on the nature of Atos’ profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to ‘follow the money’ and search out stocks that insiders are buying. 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. 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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