We Think That There Are Issues Underlying Syn Prop & Tech's (BVMF:SYNE3) Earnings

Despite announcing strong earnings, Syn Prop & Tech S.A.'s (BVMF:SYNE3) stock was sluggish. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Syn Prop & Tech's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from R$366m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Syn Prop & Tech had a rather significant contribution from unusual items relative to its profit to December 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 Syn Prop & Tech's Profit Performance

As previously mentioned, Syn Prop & Tech's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Syn Prop & Tech's underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Syn Prop & Tech at this point in time. When we did our research, we found 5 warning signs for Syn Prop & Tech (2 are significant!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Syn Prop & Tech's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.