Some Investors May Be Willing To Look Past Meko's (STO:MEKO) Soft Earnings

Investors were disappointed with the weak earnings posted by Meko AB (publ) (STO:MEKO ). However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

See our latest analysis for Meko

The Impact Of Unusual Items On Profit

For anyone who wants to understand Meko's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by kr151m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Meko doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Meko's Profit Performance

Because unusual items detracted from Meko's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Meko's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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 Meko, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Meko you should know about.

This note has only looked at a single factor that sheds light on the nature of Meko'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. 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.