Some May Be Optimistic About Breedon Group's (LON:BREE) Earnings

Shareholders appeared unconcerned with Breedon Group plc's (LON:BREE) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

See our latest analysis for Breedon Group

How Do Unusual Items Influence Profit?

To properly understand Breedon Group's profit results, we need to consider the UK£17m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Breedon Group doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our data indicates that Breedon Group insiders have been buying shares! You can click here to find out who, and how much.

Our Take On Breedon Group's Profit Performance

Unusual items (expenses) detracted from Breedon Group's earnings over the last year, but we might see an improvement next year. Because of this, we think Breedon Group's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 33% per year over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Breedon Group at this point in time. While conducting our analysis, we found that Breedon Group has 1 warning sign and it would be unwise to ignore this.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com