Toplofikatsia-Burgas AD's (BUL:TPLB) Conservative Accounting Might Explain Soft Earnings

The market for Toplofikatsia-Burgas AD's (BUL:TPLB) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Toplofikatsia-Burgas AD

How Do Unusual Items Influence Profit?

For anyone who wants to understand Toplofikatsia-Burgas AD's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by лв3.9m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. 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 Toplofikatsia-Burgas AD 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 Toplofikatsia-Burgas AD.

Our Take On Toplofikatsia-Burgas AD's Profit Performance

Unusual items (expenses) detracted from Toplofikatsia-Burgas AD's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Toplofikatsia-Burgas AD's statutory profit actually understates its earnings potential! And the EPS is up 12% over 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. If you'd like to know more about Toplofikatsia-Burgas AD as a business, it's important to be aware of any risks it's facing. For instance, we've identified 4 warning signs for Toplofikatsia-Burgas AD (1 is concerning) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Toplofikatsia-Burgas AD's 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.