Weak Statutory Earnings May Not Tell The Whole Story For Fortum Oyj (HEL:FORTUM)

Fortum Oyj's (HEL:FORTUM) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Fortum Oyj's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from €153m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Fortum Oyj's Profit Performance

Arguably, Fortum Oyj's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Fortum Oyj's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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 Fortum Oyj, you'd also look into what risks it is currently facing. For instance, we've identified 2 warning signs for Fortum Oyj (1 is significant) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Fortum Oyj'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.