Here's Why We Think Ilkka-Yhtymä Oyj's (HEL:ILK2S) Statutory Earnings Might Be Conservative

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. 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 Ilkka-Yhtymä Oyj's (HEL:ILK2S) statutory profits are a good guide to its underlying earnings.

While Ilkka-Yhtymä Oyj was able to generate revenue of €42.7m in the last twelve months, we think its profit result of €2.96m was more important.

Check out our latest analysis for Ilkka-Yhtymä Oyj

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 Ilkka-Yhtymä Oyj'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.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Ilkka-Yhtymä Oyj's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €1.1m 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. In the twelve months to September 2020, Ilkka-Yhtymä Oyj had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Our Take On Ilkka-Yhtymä Oyj's Profit Performance

As we mentioned previously, the Ilkka-Yhtymä Oyj's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Ilkka-Yhtymä Oyj's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you want to do dive deeper into Ilkka-Yhtymä Oyj, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Ilkka-Yhtymä Oyj and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of Ilkka-Yhtymä Oyj's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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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