Stock Analysis

OMV Petrom's (BVB:SNP) Problems Go Beyond Weak Profit

BVB:SNP
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A lackluster earnings announcement from OMV Petrom S.A. (BVB:SNP) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Check out our latest analysis for OMV Petrom

earnings-and-revenue-history
BVB:SNP Earnings and Revenue History May 7th 2021

How Do Unusual Items Influence Profit?

To properly understand OMV Petrom's profit results, we need to consider the RON658m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. OMV Petrom had a rather significant contribution from unusual items relative to its profit to March 2021. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On OMV Petrom's Profit Performance

As we discussed above, we think the significant positive unusual item makes OMV Petrom's earnings a poor guide to its underlying profitability. For this reason, we think that OMV Petrom's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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. At Simply Wall St, we found 3 warning signs for OMV Petrom and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of OMV Petrom's 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.

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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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