Rederiaktiebolaget Gotland's (STO:GOTL A) Promising Earnings May Rest On Soft Foundations

Rederiaktiebolaget Gotland (publ)'s (STO:GOTL A) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for Rederiaktiebolaget Gotland

How Do Unusual Items Influence Profit?

To properly understand Rederiaktiebolaget Gotland's profit results, we need to consider the kr520m gain attributed to 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. Which is hardly surprising, given the name. We can see that Rederiaktiebolaget Gotland's positive unusual items were quite significant relative to its profit in the year to December 2022. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Rederiaktiebolaget Gotland.

Our Take On Rederiaktiebolaget Gotland's Profit Performance

As we discussed above, we think the significant positive unusual item makes Rederiaktiebolaget Gotland's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Rederiaktiebolaget Gotland's underlying earnings power is lower than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Rederiaktiebolaget Gotland as a business, it's important to be aware of any risks it's facing. Our analysis shows 3 warning signs for Rederiaktiebolaget Gotland (1 is potentially serious!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of Rederiaktiebolaget Gotland'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 that insiders are buying.

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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.