TF1's (EPA:TFI) Performance Is Even Better Than Its Earnings Suggest

TF1 SA's (EPA:TFI) earnings announcement last week was disappointing for investors, despite the decent profit numbers. We did some digging and actually think they are being unnecessarily pessimistic.

See our latest analysis for TF1

How Do Unusual Items Influence Profit?

For anyone who wants to understand TF1's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €43m 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect TF1 to produce a higher profit next year, all else being equal.

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 TF1's Profit Performance

Unusual items (expenses) detracted from TF1's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that TF1's statutory profit actually understates its earnings potential! And the EPS is up 57% annually, 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 TF1 at this point in time. Every company has risks, and we've spotted 1 warning sign for TF1 you should know about.

This note has only looked at a single factor that sheds light on the nature of TF1'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.