Marie Brizard Wine & Spirits' (EPA:MBWS) Profits Appear To Have Quality Issues

By
Simply Wall St
Published
April 22, 2022
ENXTPA:MBWS
Source: Shutterstock

Marie Brizard Wine & Spirits SA's (EPA:MBWS) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

Check out our latest analysis for Marie Brizard Wine & Spirits

earnings-and-revenue-history
ENXTPA:MBWS Earnings and Revenue History April 22nd 2022

An Unusual Tax Situation

We can see that Marie Brizard Wine & Spirits received a tax benefit of €751k. This is meaningful because companies usually pay tax rather than receive tax benefits. We're sure the company was pleased with its tax benefit. And since it previously lost money, it may well simply indicate the realisation of past tax losses. However, the devil in the detail is that these kind of benefits only impact in the year they are booked, and are often one-off in nature. In the likely event the tax benefit is not repeated, we'd expect to see its statutory profit levels drop, at least in the absence of strong growth.

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 Marie Brizard Wine & Spirits' Profit Performance

As we have already discussed Marie Brizard Wine & Spirits reported that it received a tax benefit, rather than paying tax, in the last year. Given that sort of benefit is not recurring, a focus on the statutory profit might make the company seem better than it really is. Because of this, we think that it may be that Marie Brizard Wine & Spirits' statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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. So while earnings quality is important, it's equally important to consider the risks facing Marie Brizard Wine & Spirits at this point in time. In terms of investment risks, we've identified 1 warning sign with Marie Brizard Wine & Spirits, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Marie Brizard Wine & Spirits' 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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