We Think That There Are More Issues For Teqnion (STO:TEQ) Than Just Sluggish Earnings

A lackluster earnings announcement from Teqnion AB (publ) (STO:TEQ) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Teqnion's profit received a boost of kr29m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. 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 Teqnion.

Our Take On Teqnion's Profit Performance

Arguably, Teqnion's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Teqnion's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 13% 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. If you want to do dive deeper into Teqnion, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Teqnion, and understanding it should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Teqnion's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.