AB Sagax's (STO:SAGA A) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from AB Sagax (publ) (STO:SAGA A) 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

To properly understand AB Sagax's profit results, we need to consider the kr773m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. If AB Sagax doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 AB Sagax's Profit Performance

We'd posit that AB Sagax's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that AB Sagax's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into AB Sagax, you'd also look into what risks it is currently facing. For instance, we've identified 2 warning signs for AB Sagax (1 is a bit concerning) you should be familiar with.

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