Direcional Engenharia's (BVMF:DIRR3) Solid Profits Have Weak Fundamentals

Despite posting some strong earnings, the market for Direcional Engenharia S.A.'s (BVMF:DIRR3) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

We've discovered 1 warning sign about Direcional Engenharia. View them for free.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Direcional Engenharia's profit received a boost of R$81m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Direcional Engenharia doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Direcional Engenharia's Profit Performance

Arguably, Direcional Engenharia's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Direcional Engenharia's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. If you want to do dive deeper into Direcional Engenharia, you'd also look into what risks it is currently facing. For example - Direcional Engenharia has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Direcional Engenharia'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. 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.