Impressive Earnings May Not Tell The Whole Story For AB Sagax (STO:SAGA A)

AB Sagax (publ) (STO:SAGA A) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for AB Sagax

How Do Unusual Items Influence Profit?

For anyone who wants to understand AB Sagax's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from kr1.7b worth of 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. 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 that's as you'd expect, given these boosts are described as 'unusual'. We can see that AB Sagax'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 AB Sagax's Profit Performance

As we discussed above, we think the significant positive unusual item makes AB Sagax's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that AB Sagax's underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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. So while earnings quality is important, it's equally important to consider the risks facing AB Sagax at this point in time. To that end, you should learn about the 2 warning signs we've spotted with AB Sagax (including 1 which is significant).

Today we've zoomed in on a single data point to better understand the nature of AB Sagax's profit. But there are plenty of other ways to inform your opinion of a company. 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.