Does Coca-Cola FEMSA. de's (NYSE:KOF) Statutory Profit Adequately Reflect Its Underlying Profit?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. Today we'll focus on whether this year's statutory profits are a good guide to understanding Coca-Cola FEMSA. de (NYSE:KOF).

We like the fact that Coca-Cola FEMSA. de made a profit of Mex$9.13b on its revenue of Mex$187.0b, in the last year.

View our latest analysis for Coca-Cola FEMSA. de

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Coca-Cola FEMSA. de's statutory earnings. 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.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Coca-Cola FEMSA. de's profit was reduced by Mex$2.8b, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Coca-Cola FEMSA. de to produce a higher profit next year, all else being equal.

Our Take On Coca-Cola FEMSA. de's Profit Performance

Unusual items (expenses) detracted from Coca-Cola FEMSA. de's earnings over the last year, but we might see an improvement next year. Because of this, we think Coca-Cola FEMSA. de'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. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Coca-Cola FEMSA. de has 2 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of Coca-Cola FEMSA. de'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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