The Strong Earnings Posted By Medicover (STO:MCOV B) Are A Good Indication Of The Strength Of The Business

Even though Medicover AB (publ)'s (STO:MCOV B) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Medicover's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €19m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Medicover to produce a higher profit next year, all else being equal.

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 Medicover's Profit Performance

Because unusual items detracted from Medicover's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Medicover's earnings potential is at least as good as it seems, and maybe even better! And on top of that, 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. If you want to do dive deeper into Medicover, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for Medicover you should know about.

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

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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.