Are Colbún's (SNSE:COLBUN) Statutory Earnings A Good Guide To Its Underlying Profitability?

Broadly speaking, profitable businesses are less risky than unprofitable ones. 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 Colbún (SNSE:COLBUN).

While Colbún was able to generate revenue of US$1.37b in the last twelve months, we think its profit result of US$180.7m was more important. Below, you can see that both its revenue and its profit have fallen over the last three years.

View our latest analysis for Colbún

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 Colbún's statutory earnings. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Colbún's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$95m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If Colbún doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Colbún's Profit Performance

Unusual items (expenses) detracted from Colbún's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Colbún's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you'd like to know more about Colbún as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Colbún has 3 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 Colbún's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying.

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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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