In This Article:
Investors were disappointed with the weak earnings posted by 1&1 AG (ETR:1U1 ). Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.
View our latest analysis for 1&1
How Do Unusual Items Influence Profit?
For anyone who wants to understand 1&1's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €284m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. In the twelve months to September 2024, 1&1 had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.
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 1&1's Profit Performance
As we mentioned previously, the 1&1's profit was hampered by unusual items in the last year. Because of this, we think 1&1's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the 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 1&1, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for 1&1 and we think they deserve your attention.
This note has only looked at a single factor that sheds light on the nature of 1&1'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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.