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Evonik Industries AG's (ETR:EVK) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.
We've discovered 2 warning signs about Evonik Industries. View them for free.
The Impact Of Unusual Items On Profit
For anyone who wants to understand Evonik Industries' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €242m due to unusual items. 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 Evonik Industries to produce a higher profit next year, all else being equal.
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 Evonik Industries' Profit Performance
Unusual items (expenses) detracted from Evonik Industries' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Evonik Industries' statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into Evonik Industries, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Evonik Industries has 2 warning signs and it would be unwise to ignore these.
Today we've zoomed in on a single data point to better understand the nature of Evonik Industries' 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.