Should You Rely On Elve's (ATH:ELBE) Earnings Growth?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. In this article, we'll look at how useful this year's statutory profit is, when analysing Elve (ATH:ELBE).

It's good to see that over the last twelve months Elve made a profit of €1.22m on revenue of €30.1m. Happily, it has grown both its profit and revenue over the last three years, as you can see in the chart below.

Check out our latest analysis for Elve

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Elve's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Elve.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Elve's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €801k 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. If Elve doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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 on top of that, its earnings per share have grown at 61% per year over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Elve 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 Elve you should know about.

Today we've zoomed in on a single data point to better understand the nature of Elve'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 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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