Driven Brands Holdings' (NASDAQ:DRVN) Strong Earnings Are Of Good Quality

Even though Driven Brands Holdings Inc.'s (NASDAQ:DRVN) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

See our latest analysis for Driven Brands Holdings

The Impact Of Unusual Items On Profit

For anyone who wants to understand Driven Brands Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$73m due to unusual items. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Driven Brands Holdings to produce a higher profit next year, all else being equal.

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 Driven Brands Holdings' Profit Performance

Unusual items (expenses) detracted from Driven Brands Holdings' earnings over the last year, but we might see an improvement next year. Because of this, we think Driven Brands Holdings' earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. If you want to do dive deeper into Driven Brands Holdings, you'd also look into what risks it is currently facing. To help with this, we've discovered 2 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in Driven Brands Holdings.

Today we've zoomed in on a single data point to better understand the nature of Driven Brands Holdings' 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. 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.
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