We're Not So Sure You Should Rely on Byggmästare Anders J Ahlström Holding's (STO:AJA B) Statutory Earnings

Broadly speaking, profitable businesses are less risky than unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Byggmästare Anders J Ahlström Holding's (STO:AJA B) statutory profits are a good guide to its underlying earnings.

We like the fact that Byggmästare Anders J Ahlström Holding made a profit of kr70.3m on its revenue of kr186.8m, in the last year.

Check out our latest analysis for Byggmästare Anders J Ahlström Holding

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted Byggmästare Anders J Ahlström Holding's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Byggmästare Anders J Ahlström Holding.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Byggmästare Anders J Ahlström Holding's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from kr54m 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. 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, after all, that's exactly what the accounting terminology implies. Byggmästare Anders J Ahlström Holding had a rather significant contribution from unusual items relative to its profit to September 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Byggmästare Anders J Ahlström Holding's Profit Performance

As we discussed above, we think the significant positive unusual item makes Byggmästare Anders J Ahlström Holding'searnings a poor guide to its underlying profitability. For this reason, we think that Byggmästare Anders J Ahlström Holding's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. When we did our research, we found 2 warning signs for Byggmästare Anders J Ahlström Holding (1 doesn't sit too well with us!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Byggmästare Anders J Ahlström Holding's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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