STEF's (EPA:STF) Strong Earnings Are Of Good Quality

Even though STEF SA's (EPA:STF) recent earnings release was robust, the market didn't seem to notice. Our analysis suggests that investors might be missing some promising details.

Check out our latest analysis for STEF

The Impact Of Unusual Items On Profit

Importantly, our data indicates that STEF's profit was reduced by €20m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If STEF 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 STEF's Profit Performance

Because unusual items detracted from STEF'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 STEF's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 28% per year over the last three years. 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. If you'd like to know more about STEF as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for STEF you should know about.

This note has only looked at a single factor that sheds light on the nature of STEF's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.