H. Lundbeck's (CPH:HLUN A) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with H. Lundbeck A/S' (CPH:HLUN A) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

Check out the opportunities and risks within the XX Pharmaceuticals industry.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that H. Lundbeck's profit was reduced by kr.376m, due to unusual items, over the last year. 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 H. Lundbeck to produce a higher profit next year, all else being equal.

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 H. Lundbeck's Profit Performance

Because unusual items detracted from H. Lundbeck'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 H. Lundbeck's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. While it's really important to consider how well a company's statutory earnings represent its true earnings power, it's also worth taking a look at what analysts are forecasting for the future. At Simply Wall St, we have analyst estimates which you can view by clicking here.

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

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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.