Cencosud Shopping's (SNSE:CENCOMALLS) Earnings Are Weaker Than They Seem

Despite posting some strong earnings, the market for Cencosud Shopping S.A.'s (SNSE:CENCOMALLS) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Cencosud Shopping

How Do Unusual Items Influence Profit?

To properly understand Cencosud Shopping's profit results, we need to consider the CL$22b gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Cencosud Shopping doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Cencosud Shopping's Profit Performance

We'd posit that Cencosud Shopping's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Cencosud Shopping's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 11% EPS growth in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing Cencosud Shopping at this point in time. While conducting our analysis, we found that Cencosud Shopping has 1 warning sign and it would be unwise to ignore it.

Today we've zoomed in on a single data point to better understand the nature of Cencosud Shopping'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. 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.