There May Be Reason For Hope In Irani Papel e Embalagem's (BVMF:RANI3) Disappointing Earnings

Shareholders appeared unconcerned with Irani Papel e Embalagem S.A.'s (BVMF:RANI3) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Irani Papel e Embalagem

The Impact Of Unusual Items On Profit

To properly understand Irani Papel e Embalagem's profit results, we need to consider the R$136m 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, after all, that's exactly what the accounting terminology implies. If Irani Papel e Embalagem doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Irani Papel e Embalagem's Profit Performance

Unusual items (expenses) detracted from Irani Papel e Embalagem's earnings over the last year, but we might see an improvement next year. Because of this, we think Irani Papel e Embalagem's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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'd like to know more about Irani Papel e Embalagem as a business, it's important to be aware of any risks it's facing. For example, we've found that Irani Papel e Embalagem has 4 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Irani Papel e Embalagem'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.