Grupe, S.A.B. de C.V.'s (BMV:CIDMEGA) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.
View our latest analysis for Grupe. de
An Unusual Tax Situation
Grupe. de reported a tax benefit of Mex$147m, which is well worth noting. This is of course a bit out of the ordinary, given it is more common for companies to be paying tax than receiving tax benefits! Of course, prima facie it's great to receive a tax benefit. However, the devil in the detail is that these kind of benefits only impact in the year they are booked, and are often one-off in nature. In the likely event the tax benefit is not repeated, we'd expect to see its statutory profit levels drop, at least in the absence of strong growth. While we think it's good that the company has booked a tax benefit, it does mean that there's every chance the statutory profit will come in a lot higher than it would be if the income was adjusted for one-off factors.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Grupe. de.
Our Take On Grupe. de's Profit Performance
In its most recent report, Grupe. de disclosed a tax benefit, as we discussed above. Given that sort of benefit is not recurring, it's safe to say the statutory profit overstates its underlying profitability quite significantly. For this reason, we think that Grupe. de's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that, its earnings per share increased by 9.0% in the 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 Grupe. de, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Grupe. de you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Grupe. de's profit. But there are plenty of other ways to inform your opinion of a company. 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.
About BMV:CIDMEGA *
Proven track record with imperfect balance sheet.
