We Think You Can Look Beyond Etex's (EBR:094124453) Lackluster Earnings

Soft earnings didn't appear to concern Etex N.V.'s (EBR:094124453) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

Our free stock report includes 3 warning signs investors should be aware of before investing in Etex. Read for free now.

The Impact Of Unusual Items On Profit

To properly understand Etex's profit results, we need to consider the €142m expense attributed 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. 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 Etex doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Etex's Profit Performance

Unusual items (expenses) detracted from Etex's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Etex's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. 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. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Etex.

Today we've zoomed in on a single data point to better understand the nature of Etex'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 with high insider ownership.

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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.