Weak Statutory Earnings May Not Tell The Whole Story For Tessenderlo Group (EBR:TESB)

The market wasn't impressed with the soft earnings from Tessenderlo Group NV (EBR:TESB) recently. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View our latest analysis for Tessenderlo Group

The Impact Of Unusual Items On Profit

For anyone who wants to understand Tessenderlo Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from €12m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Tessenderlo Group's Profit Performance

We'd posit that Tessenderlo Group's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Tessenderlo Group's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 2 warning signs for Tessenderlo Group and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Tessenderlo Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.