Are Cyrela Brazil Realty Empreendimentos e Participações's (BVMF:CYRE3) Statutory Earnings A Good Reflection Of Its Earnings Potential?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Cyrela Brazil Realty Empreendimentos e Participações' (BVMF:CYRE3) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Cyrela Brazil Realty Empreendimentos e Participações made a profit of R$1.65b on revenue of R$4.00b. The chart below shows that revenue has improved over the last three years, and, even better, the company has moved from unprofitable to profitable.

See our latest analysis for Cyrela Brazil Realty Empreendimentos e Participações

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on Cyrela Brazil Realty Empreendimentos e Participações' statutory earnings. 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.

The Impact Of Unusual Items On Profit

To properly understand Cyrela Brazil Realty Empreendimentos e Participações' profit results, we need to consider the R$174m 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. 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 Cyrela Brazil Realty Empreendimentos e Participações to produce a higher profit next year, all else being equal.

Our Take On Cyrela Brazil Realty Empreendimentos e Participações' Profit Performance

Because unusual items detracted from Cyrela Brazil Realty Empreendimentos e Participações' 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 Cyrela Brazil Realty Empreendimentos e Participações' 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. 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 1 warning sign that you should run your eye over to get a better picture of Cyrela Brazil Realty Empreendimentos e Participações.

This note has only looked at a single factor that sheds light on the nature of Cyrela Brazil Realty Empreendimentos e Participações' 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 that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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