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Investors were disappointed with LEG Immobilien SE's (ETR:LEG) earnings, despite the strong profit numbers. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.
Check out our latest analysis for LEG Immobilien
Operating Revenue Or Not?
At most companies, some revenue streams, such as government grants, are accounted for as non-operating revenue, while the core business is said to produce operating revenue. Oftentimes, non-operating revenue spikes are not repeated, so it makes sense to be cautious where non-operating revenue has made a very large contribution to total profit. However, we note that when non-operating revenue increases suddenly, it will sometimes generate an unsustainable boost to profit. It's worth noting that LEG Immobilien saw a big increase in non-operating revenue over the last year. Indeed, its non-operating revenue rose from €128.8m last year to €270.8m this year. The high levels of non-operating revenue are problematic because if (and when) they do not repeat, then overall revenue (and profitability) of the firm will fall. In order to better understand a company's profit result, it can sometimes help to consider whether the result would be very different without a sudden increase in non-operating revenue.
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.
The Impact Of Unusual Items On Profit
Alongside that spike in non-operating revenue, it's also important to note that LEG Immobilien'sprofit suffered from unusual items, which reduced profit by €281m in the last twelve months. 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 that's hardly a surprise given these line items are considered unusual. LEG Immobilien took a rather significant hit from unusual items in the year to December 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.
Our Take On LEG Immobilien's Profit Performance
In the last year LEG Immobilien's non-operating revenue really gave it a boost, but not in a way that is necessarily going to be sustained. Having said that, it also took a hit from unusual items, which could bode well for next year, assuming the expense was one-off in nature. Based on these factors, it's hard to tell if LEG Immobilien's profits are a reasonable reflection of its underlying profitability. If you want to do dive deeper into LEG Immobilien, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for LEG Immobilien (of which 1 is a bit concerning!) you should know about.