Elve's (ATH:ELBE) Earnings Are Growing But Is There More To The Story?

Broadly speaking, profitable businesses are less risky than unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. Today we'll focus on whether this year's statutory profits are a good guide to understanding Elve (ATH:ELBE).

We like the fact that Elve made a profit of €1.22m on its revenue of €30.1m, in the last year. One positive is that it has grown both its profit and its revenue, over the last few years.

See our latest analysis for Elve

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Elve's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Elve.

The Impact Of Unusual Items On Profit

To properly understand Elve's profit results, we need to consider the €801k expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Elve to produce a higher profit next year, all else being equal.

Our Take On Elve's Profit Performance

Because unusual items detracted from Elve's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Elve's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 61% 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. If you'd like to know more about Elve as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 3 warning signs for Elve and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Elve'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. 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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