Spyrosoft Spólka Akcyjna's (WSE:SPR) Profits May Not Reveal Underlying Issues

Spyrosoft Spólka Akcyjna (WSE:SPR) just released a solid earnings report, and the stock displayed some strength. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

Check out our latest analysis for Spyrosoft Spólka Akcyjna

An Unusual Tax Situation

Spyrosoft Spólka Akcyjna reported a tax benefit of zł4.0m, which is well worth noting. This is meaningful because companies usually pay tax rather than receive tax benefits. We're sure the company was pleased with its tax benefit. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. In the likely event the tax benefit is not repeated, we'd expect to see its statutory profit levels drop, at least in the absence of strong growth. While we think it's good that the company has booked a tax benefit, it does mean that there's every chance the statutory profit will come in a lot higher than it would be if the income was adjusted for one-off factors.

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

Our Take On Spyrosoft Spólka Akcyjna's Profit Performance

As we have already discussed Spyrosoft Spólka Akcyjna reported that it received a tax benefit, rather than paying tax, in the last year. Given that sort of benefit is not recurring, a focus on the statutory profit might make the company seem better than it really is. Because of this, we think that it may be that Spyrosoft Spólka Akcyjna's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. While earnings are important, another area to consider is the balance sheet. You can see our latest analysis on Spyrosoft Spólka Akcyjna's balance sheet health here.

This note has only looked at a single factor that sheds light on the nature of Spyrosoft Spólka Akcyjna'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.

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.