Is There More To The Story Than Grodno Spólka Akcyjna's (WSE:GRN) Earnings Growth?

By
Simply Wall St
Published
February 10, 2021
WSE:GRN
Source: Shutterstock

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. 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 Grodno Spólka Akcyjna's (WSE:GRN) statutory profits are a good guide to its underlying earnings.

We like the fact that Grodno Spólka Akcyjna made a profit of zł17.6m on its revenue of zł668.0m, in the last year. One positive is that it has grown both its profit and its revenue, over the last few years.

See our latest analysis for Grodno Spólka Akcyjna

earnings-and-revenue-history
WSE:GRN Earnings and Revenue History February 11th 2021

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted Grodno Spólka Akcyjna'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 Grodno Spólka Akcyjna.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Grodno Spólka Akcyjna's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by zł3.0m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Grodno Spólka Akcyjna to produce a higher profit next year, all else being equal.

Our Take On Grodno Spólka Akcyjna's Profit Performance

Unusual items (expenses) detracted from Grodno Spólka Akcyjna's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Grodno Spólka Akcyjna's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. If you want to do dive deeper into Grodno Spólka Akcyjna, you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Grodno Spólka Akcyjna you should be mindful of and 1 of these is significant.

This note has only looked at a single factor that sheds light on the nature of Grodno Spólka Akcyjna's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying.

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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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