Some May Be Optimistic About Canadian Tire Corporation's (TSE:CTC.A) Earnings

The market for Canadian Tire Corporation, Limited's (TSE:CTC.A) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for Canadian Tire Corporation

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Canadian Tire Corporation's profit was reduced by CA$401m, 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 that's hardly a surprise given these line items are considered unusual. If Canadian Tire Corporation 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 Canadian Tire Corporation's Profit Performance

Because unusual items detracted from Canadian Tire Corporation's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Canadian Tire Corporation's earnings potential is at least as good as it seems, and maybe even better! 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 4 warning signs for Canadian Tire Corporation (1 is concerning) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Canadian Tire Corporation's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.