Are Carrefour’s (EPA:CA) Statutory Earnings A Good Reflection Of Its Earnings Potential?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. That said, the current statutory profit is not always a good guide to a company’s underlying profitability. Today we’ll focus on whether this year’s statutory profits are a good guide to understanding Carrefour (EPA:CA).

It’s good to see that over the last twelve months Carrefour made a profit of €421.0m on revenue of €73.3b.

View our latest analysis for Carrefour

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ENXTPA:CA Earnings and Revenue History August 31st 2020

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted Carrefour’s most recent profit results. 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.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Carrefour’s profit beyond the statutory numbers, it’s important to note that during the last twelve months statutory profit was reduced by €654.0m 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 Carrefour to produce a higher profit next year, all else being equal.

Our Take On Carrefour’s Profit Performance

Unusual items (expenses) detracted from Carrefour’s earnings over the last year, but we might see an improvement next year. Because of this, we think Carrefour’s earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over the last year. Of course, we’ve only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into Carrefour, you’d also look into what risks it is currently facing. Case in point: We’ve spotted 3 warning signs for Carrefour you should be aware of.

Today we’ve zoomed in on a single data point to better understand the nature of Carrefour’s 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 that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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