MTU Aero Engines' (ETR:MTX) Soft Earnings Don't Show The Whole Picture

Soft earnings didn't appear to concern MTU Aero Engines AG's (ETR:MTX) shareholders over the last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for MTU Aero Engines

The Impact Of Unusual Items On Profit

For anyone who wants to understand MTU Aero Engines' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €151m 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. 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. In the twelve months to December 2020, MTU Aero Engines 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.

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.

Our Take On MTU Aero Engines' Profit Performance

As we discussed above, we think the significant unusual expense will make MTU Aero Engines' statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that MTU Aero Engines' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about MTU Aero Engines as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that MTU Aero Engines has 3 warning signs and it would be unwise to ignore them.

Today we've zoomed in on a single data point to better understand the nature of MTU Aero Engines' 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. 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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