We Think You Can Look Beyond Redrow's (LON:RDW) Lackluster Earnings

The most recent earnings report from Redrow plc (LON:RDW) was disappointing for shareholders. However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

View our latest analysis for Redrow

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Redrow's profit was reduced by UK£164m, 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. In the twelve months to January 2023, Redrow had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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 Redrow's Profit Performance

As we discussed above, we think the significant unusual expense will make Redrow's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Redrow'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'd like to know more about Redrow as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 4 warning signs for Redrow (of which 1 is concerning!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Redrow'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. 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.