Shareholders In BrasilAgro - Companhia Brasileira de Propriedades Agrícolas (BVMF:AGRO3) Should Look Beyond Earnings For The Full Story

Despite posting strong earnings, BrasilAgro - Companhia Brasileira de Propriedades Agrícolas' (BVMF:AGRO3) stock didn't move much over the last week. We decided to have a deeper look, and we believe that investors might be worried about several concerning factors that we found.

See our latest analysis for BrasilAgro - Companhia Brasileira de Propriedades Agrícolas

The Power Of Non-Operating Revenue

Most companies divide classify their revenue as either 'operating revenue', which comes from normal operations, and other revenue, which could include government grants, for example. Generally speaking, operating revenue is a more reliable guide to the sustainable revenue generating capacity of the business. However, we note that when non-operating revenue increases suddenly, it will sometimes generate an unsustainable boost to profit. It's worth noting that BrasilAgro - Companhia Brasileira de Propriedades Agrícolas saw a big increase in non-operating revenue over the last year. In fact, our data indicates that non-operating revenue increased from -R$234.0m to -R$12.8m. The high levels of non-operating revenue are problematic because if (and when) they do not repeat, then overall revenue (and profitability) of the firm will fall. In order to better understand a company's profit result, it can sometimes help to consider whether the result would be very different without a sudden increase in non-operating revenue.

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.

How Do Unusual Items Influence Profit?

As well as that spike in non-operating revenue, we should also consider the R$105m boost to profit coming from 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. Which is hardly surprising, given the name. We can see that BrasilAgro - Companhia Brasileira de Propriedades Agrícolas' positive unusual items were quite significant relative to its profit in the year to December 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On BrasilAgro - Companhia Brasileira de Propriedades Agrícolas' Profit Performance

In its last report BrasilAgro - Companhia Brasileira de Propriedades Agrícolas benefitted from a spike in non-operating revenue which may have boosted its profit in a way that may be no more sustainable than low quality coal mining. And on top of that, it also saw an unusual item boost its profit, suggesting that next year might see a lower profit number, if these events are not repeated and everything else is equal. On reflection, the above-mentioned factors give us the strong impression that BrasilAgro - Companhia Brasileira de Propriedades Agrícolas'underlying earnings power is not as good as it might seem, based on the statutory profit numbers. If you'd like to know more about BrasilAgro - Companhia Brasileira de Propriedades Agrícolas as a business, it's important to be aware of any risks it's facing. For instance, we've identified 2 warning signs for BrasilAgro - Companhia Brasileira de Propriedades Agrícolas (1 is a bit unpleasant) you should be familiar with.

Our examination of BrasilAgro - Companhia Brasileira de Propriedades Agrícolas has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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 that insiders are buying.

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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.