We Wouldn't Rely On Viñedos Emiliana's (SNSE:EMILIANA) Statutory Earnings As A Guide

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. That said, the current statutory profit is not always a good guide to a company's underlying profitability. Today we'll focus on whether this year's statutory profits are a good guide to understanding Viñedos Emiliana (SNSE:EMILIANA).

It's good to see that over the last twelve months Viñedos Emiliana made a profit of CL$1.42b on revenue of CL$24.9b. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

View our latest analysis for Viñedos Emiliana

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

How Do Unusual Items Influence Profit?

To properly understand Viñedos Emiliana's profit results, we need to consider the CL$2.0b gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Viñedos Emiliana's positive unusual items were quite significant relative to its profit in the year to September 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Viñedos Emiliana's Profit Performance

As we discussed above, we think the significant positive unusual item makes Viñedos Emiliana'searnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Viñedos Emiliana's underlying earnings power is lower than its statutory profit. The good news is that, its earnings per share increased by 33% in 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. For example, Viñedos Emiliana has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Viñedos Emiliana'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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