We Think Quemchi's (SNSE:QUEMCHI) Solid Earnings Are Understated

Quemchi S.A.'s (SNSE:QUEMCHI) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

Check out our latest analysis for Quemchi

How Do Unusual Items Influence Profit?

For anyone who wants to understand Quemchi's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CL$40b due 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. In the twelve months to September 2024, Quemchi had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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

Our Take On Quemchi's Profit Performance

As we mentioned previously, the Quemchi's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Quemchi's statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS 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. So while earnings quality is important, it's equally important to consider the risks facing Quemchi at this point in time. At Simply Wall St, we found 3 warning signs for Quemchi and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Quemchi's 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 with high insider ownership.

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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.