The market seemed underwhelmed by last week's earnings announcement from Accentis N.V. (EBR:ACCB) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.
Check out our latest analysis for Accentis
The Impact Of Unusual Items On Profit
For anyone who wants to understand Accentis' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €1.1m 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. If Accentis 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 Accentis.
Our Take On Accentis' Profit Performance
Because unusual items detracted from Accentis' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Accentis' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Accentis at this point in time. Our analysis shows 4 warning signs for Accentis (1 is potentially serious!) and we strongly recommend you look at them before investing.
This note has only looked at a single factor that sheds light on the nature of Accentis' 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. 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.
