Shareholders Can Be Confident That N. Varveris-Moda Bagno's (ATH:MODA) Earnings Are High Quality

The subdued stock price reaction suggests that N. Varveris-Moda Bagno S.A.'s (ATH:MODA) strong earnings didn't offer any surprises. Investors are probably missing some underlying factors which are encouraging for the future of the company.

View our latest analysis for N. Varveris-Moda Bagno

The Impact Of Unusual Items On Profit

For anyone who wants to understand N. Varveris-Moda Bagno's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €998k due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If N. Varveris-Moda Bagno doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of N. Varveris-Moda Bagno.

Our Take On N. Varveris-Moda Bagno's Profit Performance

Unusual items (expenses) detracted from N. Varveris-Moda Bagno's earnings over the last year, but we might see an improvement next year. Because of this, we think N. Varveris-Moda Bagno's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 9.0% in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 3 warning signs for N. Varveris-Moda Bagno and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of N. Varveris-Moda Bagno'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. 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.

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.

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