Are Aena S.M.E's (BME:AENA) Statutory Earnings A Good Reflection Of Its Earnings Potential?

As a general rule, we think profitable companies are less risky than companies that lose money. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether Aena S.M.E's (BME:AENA) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Aena S.M.E made a profit of €220.2m on revenue of €2.74b. The chart below shows that both revenue and profit have declined over the last three years.

Check out our latest analysis for Aena S.M.E

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Aena S.M.E's statutory earnings. 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 Aena S.M.E's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €121m 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. 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 Aena S.M.E to produce a higher profit next year, all else being equal.

Our Take On Aena S.M.E's Profit Performance

Because unusual items detracted from Aena S.M.E'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 Aena S.M.E'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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 4 warning signs for Aena S.M.E (of which 1 can't be ignored!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Aena S.M.E'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. 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. 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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