Impressive Earnings May Not Tell The Whole Story For Skanska (STO:SKA B)

Unsurprisingly, Skanska AB (publ)'s (STO:SKA B) stock price was strong on the back of its healthy earnings report. However, we think that shareholders may be missing some concerning details in the numbers.

See our latest analysis for Skanska

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Skanska's profit received a boost of kr737m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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, after all, that's exactly what the accounting terminology implies. 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).

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 Skanska's Profit Performance

Arguably, Skanska's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Skanska's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 11% EPS growth in the 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 Skanska, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Skanska, 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 Skanska's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.