We Think That There Are Issues Underlying Odfjell Technology's (OB:OTL) Earnings

Despite posting some strong earnings, the market for Odfjell Technology Ltd.'s (OB:OTL) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Odfjell Technology

An Unusual Tax Situation

We can see that Odfjell Technology received a tax benefit of kr21m. This is meaningful because companies usually pay tax rather than receive 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. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal.

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 Odfjell Technology's Profit Performance

Odfjell Technology reported that it received a tax benefit, rather than paid tax, in its last report. As a result we don't think its profit result, which includes that tax-boost, is a good guide to its sustainable profit levels. Because of this, we think that it may be that Odfjell Technology's statutory profits are better than its underlying earnings power. 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. If you'd like to know more about Odfjell Technology as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Odfjell Technology (including 1 which is concerning).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.