Weak Statutory Earnings May Not Tell The Whole Story For Chimcomplex (BVB:CRC)

A lackluster earnings announcement from Chimcomplex S.A. (BVB:CRC) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Chimcomplex

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Chimcomplex's profit received a boost of RON32m in unusual items, over the last year. 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. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On Chimcomplex's Profit Performance

Arguably, Chimcomplex's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Chimcomplex's true underlying earnings power is actually less than its statutory profit. 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 while earnings quality is important, it's equally important to consider the risks facing Chimcomplex at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Chimcomplex.

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