Lemonsoft Oyj's (HEL:LEMON) Soft Earnings Don't Show The Whole Picture

Soft earnings didn't appear to concern Lemonsoft Oyj's (HEL:LEMON) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Lemonsoft Oyj

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Lemonsoft Oyj's profit was reduced by €699k, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If Lemonsoft Oyj doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Lemonsoft Oyj's Profit Performance

Because unusual items detracted from Lemonsoft Oyj'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 Lemonsoft Oyj's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Lemonsoft Oyj at this point in time. In terms of investment risks, we've identified 2 warning signs with Lemonsoft Oyj, and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Lemonsoft Oyj's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.