Weak Statutory Earnings May Not Tell The Whole Story For Alcadon Group (STO:ALCA)

The subdued market reaction suggests that Alcadon Group AB (publ)'s (STO:ALCA) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Alcadon Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from kr5.3m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Alcadon Group's Profit Performance

Arguably, Alcadon Group's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Alcadon Group's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Alcadon Group at this point in time. Every company has risks, and we've spotted 2 warning signs for Alcadon Group you should know about.

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