Kallebäck Property Invest (STO:KAPIAB) Is Growing Earnings But Are They A Good Guide?

As a general rule, we think profitable companies are less risky than companies that lose money. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. This article will consider whether Kallebäck Property Invest's (STO:KAPIAB) statutory profits are a good guide to its underlying earnings.

While Kallebäck Property Invest was able to generate revenue of kr71.0m in the last twelve months, we think its profit result of kr79.0m was more important. In the chart below, you can see that its profit and revenue have both grown over the last three years.

See our latest analysis for Kallebäck Property Invest

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 focus on the impact unusual items have had on Kallebäck Property Invest's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Kallebäck Property Invest.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Kallebäck Property Invest's profit received a boost of kr44m in unusual items, over the last year. 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'. Kallebäck Property Invest had a rather significant contribution from unusual items relative to its profit to June 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 Kallebäck Property Invest's Profit Performance

As we discussed above, we think the significant positive unusual item makes Kallebäck Property Invest'searnings a poor guide to its underlying profitability. For this reason, we think that Kallebäck Property Invest's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But the good news is that its EPS growth over the last three years has been very impressive. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 4 warning signs for Kallebäck Property Invest (of which 1 is a bit concerning!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Kallebäck Property Invest'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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