Sýn hf's (ICE:SYN) Promising Earnings May Rest On Soft Foundations

By
Simply Wall St
Published
February 24, 2022
ICSE:SYN
Source: Shutterstock

Sýn hf. (ICE:SYN) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

See our latest analysis for Sýn hf

earnings-and-revenue-history
ICSE:SYN Earnings and Revenue History February 24th 2022

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sýn hf's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from Kr2.6b worth of 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. Which is hardly surprising, given the name. Sýn hf had a rather significant contribution from unusual items relative to its profit to December 2021. 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 Sýn hf.

Our Take On Sýn hf's Profit Performance

As we discussed above, we think the significant positive unusual item makes Sýn hf's earnings a poor guide to its underlying profitability. For this reason, we think that Sýn hf's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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 want to do dive deeper into Sýn hf, you'd also look into what risks it is currently facing. Our analysis shows 2 warning signs for Sýn hf (1 is concerning!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Sýn hf'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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