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The market was pleased with the recent earnings report from Whitbread plc (LON:WTB), despite the profit numbers being soft. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.
Check out our latest analysis for Whitbread
The Impact Of Unusual Items On Profit
For anyone who wants to understand Whitbread's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by UK£101m 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Whitbread 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 Whitbread's Profit Performance
Unusual items (expenses) detracted from Whitbread's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Whitbread's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you want to do dive deeper into Whitbread, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 3 warning signs for Whitbread and you'll want to know about these bad boys.
Today we've zoomed in on a single data point to better understand the nature of Whitbread's profit. But there are plenty of other ways to inform your opinion of a company. 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.