Exmar's (EBR:EXM) Conservative Accounting Might Explain Soft Earnings

Exmar NV's (EBR:EXM) recent soft profit numbers didn't appear to worry shareholders. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

See our latest analysis for Exmar

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Exmar's profit was reduced by US$18m, due to unusual items, over the last year. 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. In the twelve months to December 2021, Exmar had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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 Exmar's Profit Performance

As we discussed above, we think the significant unusual expense will make Exmar's statutory profit lower than it would otherwise have been. Because of this, we think Exmar's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! On the other hand, its EPS actually shrunk in the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Exmar at this point in time. For instance, we've identified 5 warning signs for Exmar (2 are a bit unpleasant) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Exmar's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.