We Like The Quality Of Recordati Industria Chimica e Farmaceutica's (BIT:REC) Earnings

Recordati Industria Chimica e Farmaceutica S.p.A.'s (BIT:REC) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

See our latest analysis for Recordati Industria Chimica e Farmaceutica

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Recordati Industria Chimica e Farmaceutica's profit was reduced by €80m, due to unusual items, over the last year. 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 Recordati Industria Chimica e Farmaceutica doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Recordati Industria Chimica e Farmaceutica's Profit Performance

Because unusual items detracted from Recordati Industria Chimica e Farmaceutica's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Recordati Industria Chimica e Farmaceutica's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 12% per year over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 1 warning sign for Recordati Industria Chimica e Farmaceutica and you'll want to know about this.

Today we've zoomed in on a single data point to better understand the nature of Recordati Industria Chimica e Farmaceutica'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. 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.