Here's Why We Don't Think INGRA d.d's (ZGSE:INGR) Statutory Earnings Reflect Its Underlying Earnings Potential

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether INGRA d.d's (ZGSE:INGR) statutory profits are a good guide to its underlying earnings.

We like the fact that INGRA d.d made a profit of Kn26.7m on its revenue of Kn17.8m, in the last year.

Check out our latest analysis for INGRA d.d

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 INGRA d.d'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 INGRA d.d.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that INGRA d.d's profit received a boost of Kn11m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. We can see that INGRA d.d's positive unusual items were quite significant relative to its profit in the year to September 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On INGRA d.d's Profit Performance

As previously mentioned, INGRA d.d's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that INGRA d.d's underlying earnings power is lower than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 5 warning signs for INGRA d.d (2 are concerning) you should be familiar with.

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

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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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