Investors Can Find Comfort In HELMA Eigenheimbau's (ETR:H5E) Earnings Quality

Investors were disappointed with the weak earnings posted by HELMA Eigenheimbau Aktiengesellschaft (ETR:H5E ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

See our latest analysis for HELMA Eigenheimbau

The Impact Of Unusual Items On Profit

For anyone who wants to understand HELMA Eigenheimbau's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €21m 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, after all, that's exactly what the accounting terminology implies. In the twelve months to December 2022, HELMA Eigenheimbau had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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 HELMA Eigenheimbau's Profit Performance

As we discussed above, we think the significant unusual expense will make HELMA Eigenheimbau's statutory profit lower than it would otherwise have been. Because of this, we think HELMA Eigenheimbau's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 5 warning signs for HELMA Eigenheimbau you should be mindful of and 1 of these is a bit concerning.

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