Hub.Tech's (WSE:HUB) Conservative Accounting Might Explain Soft Earnings

Hub.Tech SA's (WSE:HUB) earnings announcement last week didn't impress shareholders. While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

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The Impact Of Unusual Items On Profit

To properly understand Hub.Tech's profit results, we need to consider the zł5.7m expense attributed 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. If Hub.Tech doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Hub.Tech's Profit Performance

Unusual items (expenses) detracted from Hub.Tech's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Hub.Tech's statutory profit actually understates its earnings potential! And the EPS is up 23% annually, 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'd like to know more about Hub.Tech as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Hub.Tech, and understanding this should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Hub.Tech'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. 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 with significant insider holdings to be useful.

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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.