Motorpoint Group's (LON:MOTR) Sluggish Earnings Might Be Just The Beginning Of Its Problems

By
Simply Wall St
Published
December 01, 2021
LSE:MOTR
Source: Shutterstock

Motorpoint Group plc's (LON:MOTR) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Check out our latest analysis for Motorpoint Group

earnings-and-revenue-history
LSE:MOTR Earnings and Revenue History December 2nd 2021

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Motorpoint Group's profit received a boost of UK£1.5m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Motorpoint Group's Profit Performance

Arguably, Motorpoint Group's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Motorpoint Group's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, Motorpoint Group has 2 warning signs (and 1 which is significant) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Motorpoint 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 that insiders are buying to be useful.

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