Stock Analysis

Ouro Fino Saúde Animal Participações (BVMF:OFSA3) Is Growing Earnings But Are They A Good Guide?

BOVESPA:OFSA3
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As a general rule, we think profitable companies are less risky than companies that lose money. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. In this article, we'll look at how useful this year's statutory profit is, when analysing Ouro Fino Saúde Animal Participações (BVMF:OFSA3).

While Ouro Fino Saúde Animal Participações was able to generate revenue of R$706.1m in the last twelve months, we think its profit result of R$83.2m was more important. Happily, it has grown both its profit and revenue over the last three years, as you can see in the chart below.

Check out our latest analysis for Ouro Fino Saúde Animal Participações

earnings-and-revenue-history
BOVESPA:OFSA3 Earnings and Revenue History January 3rd 2021

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will discuss how unusual items have impacted Ouro Fino Saúde Animal Participações' most recent profit results. 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?

To properly understand Ouro Fino Saúde Animal Participações' profit results, we need to consider the R$26m expense attributed 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. If Ouro Fino Saúde Animal Participações doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Ouro Fino Saúde Animal Participações' Profit Performance

Because unusual items detracted from Ouro Fino Saúde Animal Participações' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Ouro Fino Saúde Animal Participações' statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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 Ouro Fino Saúde Animal Participações as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 3 warning signs for Ouro Fino Saúde Animal Participações and you'll want to know about them.

This note has only looked at a single factor that sheds light on the nature of Ouro Fino Saúde Animal Participações' 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. 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. 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.
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