The Strong Earnings Posted By Companhia Brasileira de Alumínio (BVMF:CBAV3) Are A Good Indication Of The Strength Of The Business

Companhia Brasileira de Alumínio's (BVMF:CBAV3) strong earnings report was rewarded with a positive stock price move. Our analysis found some more factors that we think are good for shareholders.

Check out our latest analysis for Companhia Brasileira de Alumínio

The Impact Of Unusual Items On Profit

For anyone who wants to understand Companhia Brasileira de Alumínio's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by R$488m due 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. 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 Companhia Brasileira de Alumínio 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 Companhia Brasileira de Alumínio's Profit Performance

Because unusual items detracted from Companhia Brasileira de Alumínio's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Companhia Brasileira de Alumínio's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 2 warning signs for Companhia Brasileira de Alumínio and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Companhia Brasileira de Alumínio'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. 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 that insiders are buying 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.