We Like Sudatel Telecom Group's (ADX:SUDATEL) Earnings For More Than Just Statutory Profit

Sudatel Telecom Group Limited (ADX:SUDATEL) announced a healthy earnings result recently, and the market rewarded it with a strong uplift in the stock price. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals.

Check out our latest analysis for Sudatel Telecom Group

The Impact Of Unusual Items On Profit

For anyone who wants to understand Sudatel Telecom Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$26m 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. Assuming those unusual expenses don't come up again, we'd therefore expect Sudatel Telecom Group to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sudatel Telecom Group.

Our Take On Sudatel Telecom Group's Profit Performance

Because unusual items detracted from Sudatel Telecom 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 Sudatel Telecom Group's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. So while earnings quality is important, it's equally important to consider the risks facing Sudatel Telecom Group at this point in time. Every company has risks, and we've spotted 3 warning signs for Sudatel Telecom Group (of which 2 are concerning!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Sudatel Telecom Group'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.