Are Züblin Immobilien Holding's (VTX:ZUBN) Statutory Earnings A Good Guide To Its Underlying Profitability?

As a general rule, we think profitable companies are less risky than companies that lose money. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing Züblin Immobilien Holding (VTX:ZUBN).

While Züblin Immobilien Holding was able to generate revenue of CHF9.40m in the last twelve months, we think its profit result of CHF2.20m was more important. The chart below shows that revenue has improved over the last three years, and, even better, the company has moved from unprofitable to profitable.

View our latest analysis for Züblin Immobilien Holding

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 focus on the impact unusual items have had on Züblin Immobilien Holding's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Züblin Immobilien Holding.

The Impact Of Unusual Items On Profit

To properly understand Züblin Immobilien Holding's profit results, we need to consider the CHF2.8m expense attributed 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. Züblin Immobilien Holding took a rather significant hit from unusual items in the year to September 2020. 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 Züblin Immobilien Holding's Profit Performance

As we discussed above, we think the significant unusual expense will make Züblin Immobilien Holding's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Züblin Immobilien Holding's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the 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. 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 (1 is significant!) that you ought to be aware of before buying any shares in Züblin Immobilien Holding.

This note has only looked at a single factor that sheds light on the nature of Züblin Immobilien Holding's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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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