Statutory Profit Doesn't Reflect How Good Ser Educacional's (BVMF:SEER3) Earnings Are

Investors were underwhelmed by the solid earnings posted by Ser Educacional S.A. (BVMF:SEER3) recently. We did some digging and actually think they are being unnecessarily pessimistic.

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The Impact Of Unusual Items On Profit

To properly understand Ser Educacional's profit results, we need to consider the R$54m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 Ser Educacional to produce a higher profit next year, all else being equal.

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 Ser Educacional's Profit Performance

Unusual items (expenses) detracted from Ser Educacional's earnings over the last year, but we might see an improvement next year. Because of this, we think Ser Educacional's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Ser Educacional at this point in time. In terms of investment risks, we've identified 2 warning signs with Ser Educacional, and understanding these should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Ser Educacional's profit. But there are plenty of other ways to inform your opinion of a company. 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 with significant insider holdings 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.