We Believe That HBR Realty Empreendimentos Imobiliários' (BVMF:HBRE3) Weak Earnings Are A Good Indicator Of Underlying Profitability

HBR Realty Empreendimentos Imobiliários S.A. (BVMF:HBRE3) recently posted soft earnings but shareholders didn't react strongly. We did some digging, and we believe that investors are missing some worrying factors underlying the profit figures.

We've discovered 6 warning signs about HBR Realty Empreendimentos Imobiliários. View them for free.

Operating Revenue Or Not?

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. Oftentimes, non-operating revenue spikes are not repeated, so it makes sense to be cautious where non-operating revenue has made a very large contribution to total profit. However, we note that when non-operating revenue increases suddenly, it will sometimes generate an unsustainable boost to profit. It's worth noting that HBR Realty Empreendimentos Imobiliários saw a big increase in non-operating revenue over the last year. In fact, our data indicates that non-operating revenue increased from -R$2.67m to R$25.8m. If that non-operating revenue fails to manifest in the current year, then there's a real risk the bottom line profit result will be impacted negatively. 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$205m boost to profit coming from unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 HBR Realty Empreendimentos Imobiliários' positive unusual items were quite significant relative to its profit in the year to March 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On HBR Realty Empreendimentos Imobiliários' Profit Performance

In the last year HBR Realty Empreendimentos Imobiliários' non-operating revenue really gave it a boost, but not in a way that is necessarily going to be sustained. Furthermore, unusual items also made a nice positive contribution to its profit, which may well drop next year (all else being equal) if these phenomena are not repeated. For all the reasons mentioned above, we think that, at a glance, HBR Realty Empreendimentos Imobiliários' statutory profits could be considered to be low quality, because they are likely to give investors an overly positive impression of the company. If you'd like to know more about HBR Realty Empreendimentos Imobiliários as a business, it's important to be aware of any risks it's facing. For example, we've found that HBR Realty Empreendimentos Imobiliários has 6 warning signs (2 are a bit concerning!) that deserve your attention before going any further with your analysis.

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.