Are Fielmann's (ETR:FIE) Statutory Earnings A Good Guide To Its Underlying Profitability?

January 12, 2020
  •  Updated
November 29, 2022
XTRA:FIE
Source: Shutterstock

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing Fielmann (ETR:FIE).

While Fielmann was able to generate revenue of €1.51b in the last twelve months, we think its profit result of €175.0m was more important. In the chart below, you can see that its profit and revenue have both grown over the last three years.

See our latest analysis for Fielmann

XTRA:FIE Income Statement, January 13th 2020
XTRA:FIE Income Statement, January 13th 2020

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted Fielmann's most recent profit results. 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.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Fielmann's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €59m 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. Assuming those unusual expenses don't come up again, we'd therefore expect Fielmann to produce a higher profit next year, all else being equal.

Our Take On Fielmann's Profit Performance

Because unusual items detracted from Fielmann's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Fielmann's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 8.9% per year over the last three years. 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. Ultimately, this article has formed an opinion based on historical data. However, it can also be great to think about what analysts are forecasting for the future. Luckily, you can check out what analysts are forecsting by clicking here.

This note has only looked at a single factor that sheds light on the nature of Fielmann's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.