Weak Statutory Earnings May Not Tell The Whole Story For TLG Immobilien (HMSE:TLG)

TLG Immobilien AG's (HMSE:TLG) stock showed strength after its weak earnings report. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

See our latest analysis for TLG Immobilien

The Impact Of Unusual Items On Profit

For anyone who wants to understand TLG Immobilien's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from €223m 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, after all, that's exactly what the accounting terminology implies. TLG Immobilien had a rather significant contribution from unusual items relative to its profit to December 2021. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On TLG Immobilien's Profit Performance

As we discussed above, we think the significant positive unusual item makes TLG Immobilien's earnings a poor guide to its underlying profitability. For this reason, we think that TLG Immobilien's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 2 warning signs with TLG Immobilien, and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of TLG Immobilien's profit. But there are plenty of other ways to inform your opinion of a company. 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.