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Investors signalled that they were pleased with The Coca-Cola Company's (NYSE:KO) most recent earnings report. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers.
See our latest analysis for Coca-Cola
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Coca-Cola's profit was reduced by US$2.4b, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Coca-Cola doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Coca-Cola's Profit Performance
Because unusual items detracted from Coca-Cola's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Coca-Cola's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 9.0% per year over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Coca-Cola at this point in time. Every company has risks, and we've spotted 2 warning signs for Coca-Cola (of which 1 is a bit concerning!) you should know about.
This note has only looked at a single factor that sheds light on the nature of Coca-Cola'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.
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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.