Why Almendral's (SNSE:ALMENDRAL) Shaky Earnings Are Just The Beginning Of Its Problems

Almendral S.A.'s (SNSE:ALMENDRAL) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Almendral

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Almendral's profit received a boost of CL$42b in unusual items, over the last year. 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. Which is hardly surprising, given the name. 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).

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

Our Take On Almendral's Profit Performance

Arguably, Almendral's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Almendral's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 14% over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Almendral has 4 warning signs and it would be unwise to ignore these.

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