Svenska Cellulosa Aktiebolaget (STO:SCA B) Strong Profits May Be Masking Some Underlying Issues

The recent earnings posted by Svenska Cellulosa Aktiebolaget SCA (publ) (STO:SCA B) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for Svenska Cellulosa Aktiebolaget

The Impact Of Unusual Items On Profit

To properly understand Svenska Cellulosa Aktiebolaget's profit results, we need to consider the kr1.8b 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Svenska Cellulosa Aktiebolaget's positive unusual items were quite significant relative to its profit in the year to December 2024. 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 Svenska Cellulosa Aktiebolaget's Profit Performance

As we discussed above, we think the significant positive unusual item makes Svenska Cellulosa Aktiebolaget's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Svenska Cellulosa Aktiebolaget's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Svenska Cellulosa Aktiebolaget at this point in time. Every company has risks, and we've spotted 2 warning signs for Svenska Cellulosa Aktiebolaget you should know about.

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