We Think That There Are More Issues For Mineralbrunnen Überkingen-Teinach GmbH KGaA (FRA:MUT) Than Just Sluggish Earnings

A lackluster earnings announcement from Mineralbrunnen Überkingen-Teinach GmbH & Co. KGaA (FRA:MUT) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Mineralbrunnen Überkingen-Teinach GmbH KGaA

The Impact Of Unusual Items On Profit

For anyone who wants to understand Mineralbrunnen Überkingen-Teinach GmbH KGaA's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €374k 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. Assuming those unusual expenses don't come up again, we'd therefore expect Mineralbrunnen Überkingen-Teinach GmbH KGaA to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Mineralbrunnen Überkingen-Teinach GmbH KGaA.

An Unusual Tax Situation

Just as we noted the unusual items, we must inform you that Mineralbrunnen Überkingen-Teinach GmbH KGaA received a tax benefit which contributed €814k to the bottom line. It's always a bit noteworthy when a company is paid by the tax man, rather than paying the tax man. The receipt of a tax benefit is obviously a good thing, on its own. However, the devil in the detail is that these kind of benefits only impact in the year they are booked, and are often one-off in nature. In the likely event the tax benefit is not repeated, we'd expect to see its statutory profit levels drop, at least in the absence of strong growth.

Our Take On Mineralbrunnen Überkingen-Teinach GmbH KGaA's Profit Performance

In its last report Mineralbrunnen Überkingen-Teinach GmbH KGaA received a tax benefit which might make its profit look better than it really is on a underlying level. Having said that, it also had a unusual item reducing its profit. Based on these factors, it's hard to tell if Mineralbrunnen Überkingen-Teinach GmbH KGaA's profits are a reasonable reflection of its underlying profitability. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 2 warning signs with Mineralbrunnen Überkingen-Teinach GmbH KGaA, and understanding them should be part of your investment process.

Our examination of Mineralbrunnen Überkingen-Teinach GmbH KGaA has focussed on certain factors that can make its earnings look better than they are. 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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