We Think Kelly Services' (NASDAQ:KELY.A) Solid Earnings Are Understated

The stock was sluggish on the back of Kelly Services, Inc.'s (NASDAQ:KELY.A) recent earnings report. Our analysis suggests that there are some reasons for hope that investors should be aware of.

See our latest analysis for Kelly Services

How Do Unusual Items Influence Profit?

To properly understand Kelly Services' profit results, we need to consider the US$16m 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, after all, that's exactly what the accounting terminology implies. If Kelly Services doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Kelly Services' Profit Performance

Unusual items (expenses) detracted from Kelly Services' earnings over the last year, but we might see an improvement next year. Because of this, we think Kelly Services' earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over 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. If you'd like to know more about Kelly Services as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Kelly Services and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of Kelly Services' 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.