Are Groupe Minoteries's (VTX:GMI) Statutory Earnings A Good Guide To Its Underlying Profitability?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. In this article, we'll look at how useful this year's statutory profit is, when analysing Groupe Minoteries (VTX:GMI).

We like the fact that Groupe Minoteries made a profit of CHF5.16m on its revenue of CHF144.2m, in the last year. In the last few years its profit has fallen, although its revenue was steady, as you can see in the chart below.

View our latest analysis for Groupe Minoteries

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 Groupe Minoteries' most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Groupe Minoteries.

How Do Unusual Items Influence Profit?

To properly understand Groupe Minoteries' profit results, we need to consider the CHF445k 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 Groupe Minoteries' Profit Performance

Arguably, Groupe Minoteries' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Groupe Minoteries' statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the 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. While earnings are important, another area to consider is the balance sheet. You can see our latest analysis on Groupe Minoteries' balance sheet health here.

This note has only looked at a single factor that sheds light on the nature of Groupe Minoteries' profit. But there are plenty of other ways to inform your opinion of a company. 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. 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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