TOMA's (SEP:TOMA) Weak Earnings May Only Reveal A Part Of The Whole Picture

A lackluster earnings announcement from TOMA, a.s. (SEP:TOMA) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for TOMA

The Impact Of Unusual Items On Profit

For anyone who wants to understand TOMA's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from Kč9.7m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. 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 TOMA.

Our Take On TOMA's Profit Performance

Arguably, TOMA's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that TOMA's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over 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 want to do dive deeper into TOMA, you'd also look into what risks it is currently facing. Be aware that TOMA is showing 2 warning signs in our investment analysis and 1 of those doesn't sit too well with us...

Today we've zoomed in on a single data point to better understand the nature of TOMA's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.