Stock Analysis

Grupo EcoenerU's (BME:ENER) Problems Go Beyond Poor Profit

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Shareholders didn't appear too concerned by Grupo Ecoener, S.A.U.'s (BME:ENER) weak earnings. We did some analysis and found some concerning details beneath the statutory profit number.

View our latest analysis for Grupo EcoenerU

BME:ENER Earnings and Revenue History September 28th 2021

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Grupo EcoenerU's profit received a boost of €2.8m in unusual items, over the last year. 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. If Grupo EcoenerU 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.

An Unusual Tax Situation

Having already discussed the impact of the unusual items, we should also note that Grupo EcoenerU received a tax benefit of €6.6m. This is meaningful because companies usually pay tax rather than receive tax benefits. The receipt of a tax benefit is obviously a good thing, on its own. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal.

Our Take On Grupo EcoenerU's Profit Performance

In its last report Grupo EcoenerU received a tax benefit which might make its profit look better than it really is on a underlying level. And on top of that, it also saw an unusual item boost its profit, suggesting that next year might see a lower profit number, if these events are not repeated. Considering all this we'd argue Grupo EcoenerU's profits probably give an overly generous impression of its sustainable level of profitability. If you'd like to know more about Grupo EcoenerU as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for Grupo EcoenerU (1 is potentially serious!) and we strongly recommend you look at these before investing.

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. 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.

Valuation is complex, but we're helping make it simple.

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