Dierig Holding's (ETR:DIE) Soft Earnings Are Actually Better Than They Appear

Soft earnings didn't appear to concern Dierig Holding AG's (ETR:DIE) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for Dierig Holding

The Impact Of Unusual Items On Profit

For anyone who wants to understand Dierig Holding's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €2.7m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If Dierig Holding doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Dierig Holding's Profit Performance

Because unusual items detracted from Dierig Holding's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Dierig Holding's earnings potential is at least as good as it seems, and maybe even better! 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. So while earnings quality is important, it's equally important to consider the risks facing Dierig Holding at this point in time. You'd be interested to know, that we found 3 warning signs for Dierig Holding and you'll want to know about these bad boys.

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