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Deutsche Lufthansa AG's (ETR:LHA) stock showed strength, with investors undeterred by its weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Deutsche Lufthansa.
Check out our latest analysis for Deutsche Lufthansa
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Deutsche Lufthansa's profit received a boost of €268m in unusual items, over the last year. 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. If Deutsche Lufthansa doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Deutsche Lufthansa's Profit Performance
Arguably, Deutsche Lufthansa's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Deutsche Lufthansa's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 3 warning signs with Deutsche Lufthansa, and understanding these bad boys should be part of your investment process.
This note has only looked at a single factor that sheds light on the nature of Deutsche Lufthansa'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. 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.