Does Mostostal Zabrze's (WSE:MSZ) Statutory Profit Adequately Reflect Its Underlying Profit?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. Today we'll focus on whether this year's statutory profits are a good guide to understanding Mostostal Zabrze (WSE:MSZ).

While Mostostal Zabrze was able to generate revenue of zł582.5m in the last twelve months, we think its profit result of zł10.5m was more important. Even though revenue is down over the last three years, you can see in the chart below that the company has moved from loss-making to profitable.

See our latest analysis for Mostostal Zabrze

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Mostostal Zabrze's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Mostostal Zabrze.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Mostostal Zabrze's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from zł3.4m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If Mostostal Zabrze doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On Mostostal Zabrze's Profit Performance

We'd posit that Mostostal Zabrze's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Mostostal Zabrze's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 23% in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Mostostal Zabrze, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Mostostal Zabrze'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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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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