Zwahlen & Mayr's (VTX:ZWM) Earnings Are Weaker Than They Seem

Despite posting some strong earnings, the market for Zwahlen & Mayr SA's (VTX:ZWM) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

See our latest analysis for Zwahlen & Mayr

The Impact Of Unusual Items On Profit

To properly understand Zwahlen & Mayr's profit results, we need to consider the CHF1.1m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. Zwahlen & Mayr had a rather significant contribution from unusual items relative to its profit to December 2021. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zwahlen & Mayr.

Our Take On Zwahlen & Mayr's Profit Performance

As previously mentioned, Zwahlen & Mayr's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Zwahlen & Mayr's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Zwahlen & Mayr as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Zwahlen & Mayr (including 1 which is a bit concerning).

This note has only looked at a single factor that sheds light on the nature of Zwahlen & Mayr'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. 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.