Affine Investments Limited (JSE:ANI) has just reported strong earnings, and the market has sent the share price up a healthy clip in response. We’ve done some analysis and believe investors may be missing some of the details behind the profit numbers.
Check out our latest analysis for Afine Investments
How do rare items affect profits?
For those who want to understand Afine Investments’ profits beyond the statutory figures, it is important to note that statutory profits over the last 12 months came from R42 million worth of special items. High profits are always good, but a large contribution from special items can dampen our enthusiasm. In analysing the majority of listed companies around the world, we find that significant special items are often not repeated. And that’s to be expected, given that these boosts are described as “extraordinary”. Afine Investments had a rather large contribution from special items compared to profits to February 2024. As a result, we can infer that special items are boosting statutory profits to a larger extent than they would otherwise be.
Notes: We always encourage investors to check the strength of their balance sheet, and you can click here to see our balance sheet analysis of Afine Investments.
Our take on Affine Investments’ earnings performance
As mentioned above, Affin Investments’s large boost from unusual items won’t last forever, so statutory profits are probably a poor indicator of the company’s underlying earnings power. For this reason, we think Affin Investments’ statutory profits are a poor indicator of the company’s underlying earnings power and may give investors an overly positive impression of the company. The silver lining is that EPS growth over the past year has been really impressive, even if it’s not a perfect indicator. Of course, we’re only just scratching the surface when it comes to analysing earnings. We can also consider factors such as margins, forecast growth and return on investment. So while the quality of earnings is important, it’s equally important to consider the risks Affin Investments faces at the moment. Interestingly, we found that: 5 warning signs for Affin Investments And you would like to know about them.
Today we’ve focused on one data point to get a better understanding of the nature of Afine Investments’ profits, but there are plenty of other ways to inform your opinion of a company. Some consider a high return on equity to be a good sign of a quality business, so you may want to look at this one. free A collection of companies boasting high return on equity, or a list of stocks with high percent of insider ownership.
Valuation is complicated, but we can help make it simple.
To find out whether Afine Investments is overvalued or undervalued, check out our comprehensive analysis. Fair value estimates, risks and warnings, dividends, insider trading, financial strength.
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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
