Weak Statutory Earnings May Not Tell The Whole Story For Mennica Polska (WSE:MNC)

The subdued market reaction suggests that Mennica Polska S.A.'s (WSE:MNC) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Mennica Polska's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from zł13m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Mennica Polska doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Mennica Polska.

Our Take On Mennica Polska's Profit Performance

Arguably, Mennica Polska's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Mennica Polska's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased 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 while earnings quality is important, it's equally important to consider the risks facing Mennica Polska at this point in time. Case in point: We've spotted 1 warning sign for Mennica Polska you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Mennica Polska'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 with high insider ownership.

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.