Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's (BVMF:INTB3) Weak Earnings May Only Reveal A Part Of The Whole Picture

Intelbras S.A. - Indústria de Telecomunicação Eletrônica Brasileira's (BVMF:INTB3) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

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An Unusual Tax Situation

We can see that Intelbras - Indústria de Telecomunicação Eletrônica Brasileira received a tax benefit of R$31m. This is meaningful because companies usually pay tax rather than receive tax benefits. We're sure the company was pleased with its tax benefit. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal. While we think it's good that the company has booked a tax benefit, it does mean that there's every chance the statutory profit will come in a lot higher than it would be if the income was adjusted for one-off factors.

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 Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's Profit Performance

As we have already discussed Intelbras - Indústria de Telecomunicação Eletrônica Brasileira reported that it received a tax benefit, rather than paying tax, in the last year. As a result we don't think its profit result, which includes that tax-boost, is a good guide to its sustainable profit levels. Therefore, it seems possible to us that Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 13% over the last three years. 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 want to do dive deeper into Intelbras - Indústria de Telecomunicação Eletrônica Brasileira, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Intelbras - Indústria de Telecomunicação Eletrônica Brasileira has 1 warning sign and it would be unwise to ignore this.

Today we've zoomed in on a single data point to better understand the nature of Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's profit. 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. 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.