Athens Water Supply and Sewerage's (ATH:EYDAP) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Athens Water Supply and Sewerage Company S.A.'s (ATH:EYDAP) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

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The Impact Of Unusual Items On Profit

To properly understand Athens Water Supply and Sewerage's profit results, we need to consider the €4.7m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. Athens Water Supply and Sewerage had a rather significant contribution from unusual items relative to its profit to December 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Athens Water Supply and Sewerage.

Our Take On Athens Water Supply and Sewerage's Profit Performance

As we discussed above, we think the significant positive unusual item makes Athens Water Supply and Sewerage's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Athens Water Supply and Sewerage's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Athens Water Supply and Sewerage at this point in time. In terms of investment risks, we've identified 2 warning signs with Athens Water Supply and Sewerage, and understanding them should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Athens Water Supply and Sewerage's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.