Does Phoenix Mecano's (VTX:PM) Statutory Profit Adequately Reflect Its Underlying Profit?

Broadly speaking, profitable businesses are less risky than unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Phoenix Mecano's (VTX:PM) statutory profits are a good guide to its underlying earnings.

While Phoenix Mecano was able to generate revenue of €651.0m in the last twelve months, we think its profit result of €3.84m was more important. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

View our latest analysis for Phoenix Mecano

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Phoenix Mecano'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

For anyone who wants to understand Phoenix Mecano's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €15m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 June 2020, Phoenix Mecano 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.

Our Take On Phoenix Mecano's Profit Performance

As we mentioned previously, the Phoenix Mecano's profit was hampered by unusual items in the last year. Because of this, we think Phoenix Mecano's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the last year. 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 Phoenix Mecano, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Phoenix Mecano has 4 warning signs and it would be unwise to ignore these bad boys.

Today we've zoomed in on a single data point to better understand the nature of Phoenix Mecano'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 that insiders are buying to be useful.

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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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