Locaweb Serviços de Internet's (BVMF:LWSA3) Earnings May Just Be The Starting Point

Locaweb Serviços de Internet S.A. (BVMF:LWSA3) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Locaweb Serviços de Internet's profit was reduced by R$77m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. In the twelve months to March 2025, Locaweb Serviços de Internet had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its 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 Locaweb Serviços de Internet's Profit Performance

As we discussed above, we think the significant unusual expense will make Locaweb Serviços de Internet's statutory profit lower than it would otherwise have been. Because of this, we think Locaweb Serviços de Internet's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And it's also positive that 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Locaweb Serviços de Internet has 2 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of Locaweb Serviços de Internet'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. 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.