Aktieselskabet Schouw's (CPH:SCHO) Shareholders May Want To Dig Deeper Than Statutory Profit

Aktieselskabet Schouw & Co.'s (CPH:SCHO) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

See our latest analysis for Aktieselskabet Schouw

The Impact Of Unusual Items On Profit

To properly understand Aktieselskabet Schouw's profit results, we need to consider the kr.89m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. If Aktieselskabet Schouw doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Aktieselskabet Schouw's Profit Performance

Arguably, Aktieselskabet Schouw's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Aktieselskabet Schouw's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 20% per annum growth in EPS for the last three. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Aktieselskabet Schouw at this point in time. In terms of investment risks, we've identified 1 warning sign with Aktieselskabet Schouw, and understanding it should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Aktieselskabet Schouw'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. 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.