There Are Some Reasons To Suggest That ACRON HELVETIA I Immobilien's (BRN:AHAN) Earnings A Poor Reflection Of Profitability

ACRON HELVETIA I Immobilien Aktiengesellschaft's (BRN:AHAN) stock performed strongly after the recent earnings report. Despite this, we feel that there are some reasons to be cautious with these earnings.

Check out our latest analysis for ACRON HELVETIA I Immobilien

Operating Revenue Or Not?

Most companies divide classify their revenue as either 'operating revenue', which comes from normal operations, and other revenue, which could include government grants, for example. Oftentimes, non-operating revenue spikes are not repeated, so it makes sense to be cautious where non-operating revenue has made a very large contribution to total profit. However, we note that when non-operating revenue increases suddenly, it will sometimes generate an unsustainable boost to profit. Notably, ACRON HELVETIA I Immobilien had a significant increase in non-operating revenue over the last year. In fact, our data indicates that non-operating revenue increased from -CHF1.8k to CHF100.0k. If that non-operating revenue fails to manifest in the current year, then there's a real risk the bottom line profit result will be impacted negatively. Sometimes, you can get a better idea of the underlying earnings potential of a company by excluding unusual boosts to non-operating revenue.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of ACRON HELVETIA I Immobilien.

How Do Unusual Items Influence Profit?

As well as that spike in non-operating revenue, we should also consider the CHF1.8m boost to profit coming from unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that ACRON HELVETIA I Immobilien's positive unusual items were quite significant relative to its profit in the year to December 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On ACRON HELVETIA I Immobilien's Profit Performance

In the last year ACRON HELVETIA I Immobilien's non-operating revenue really gave it a boost, but not in a way that is necessarily going to be sustained. Furthermore, unusual items also made a nice positive contribution to its profit, which may well drop next year (all else being equal) if these phenomena are not repeated. Considering all this we'd argue ACRON HELVETIA I Immobilien's profits probably give an overly generous impression of its sustainable level of profitability. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To help with this, we've discovered 5 warning signs (3 can't be ignored!) that you ought to be aware of before buying any shares in ACRON HELVETIA I Immobilien.

Our examination of ACRON HELVETIA I Immobilien has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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. 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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