We Think Wojas' (WSE:WOJ) Healthy Earnings Might Be Conservative

Investors signalled that they were pleased with Wojas S.A.'s (WSE:WOJ) most recent earnings report, with a strong stock price reaction. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals.

View our latest analysis for Wojas

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Wojas' profit was reduced by zł4.4m, due to unusual items, over the last year. 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. In the twelve months to June 2021, Wojas had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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

Our Take On Wojas' Profit Performance

As we discussed above, we think the significant unusual expense will make Wojas' statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Wojas' statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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 Wojas, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 4 warning signs for Wojas (of which 2 are a bit concerning!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Wojas' 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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.

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