Does Bobst Group's (VTX:BOBNN) Statutory Profit Adequately Reflect Its Underlying Profit?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether Bobst Group's (VTX:BOBNN) statutory profits are a good guide to its underlying earnings.

We like the fact that Bobst Group made a profit of CHF31.7m on its revenue of CHF1.43b, in the last year. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

View our latest analysis for Bobst Group

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted Bobst Group's 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.

The Impact Of Unusual Items On Profit

To properly understand Bobst Group's profit results, we need to consider the CHF3.6m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Our Take On Bobst Group's Profit Performance

We'd posit that Bobst Group's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Bobst Group's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. If you want to do dive deeper into Bobst Group, you'd also look into what risks it is currently facing. To that end, you should learn about the 2 warning signs we've spotted with Bobst Group (including 1 which is potentially serious).

This note has only looked at a single factor that sheds light on the nature of Bobst Group's 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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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