Crown Crafts' (NASDAQ:CRWS) Soft Earnings Don't Show The Whole Picture

By
Simply Wall St
Published
June 15, 2021
NasdaqCM:CRWS
Source: Shutterstock

Soft earnings didn't appear to concern Crown Crafts, Inc.'s (NASDAQ:CRWS) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

Check out our latest analysis for Crown Crafts

earnings-and-revenue-history
NasdaqCM:CRWS Earnings and Revenue History June 16th 2021

The Impact Of Unusual Items On Profit

For anyone who wants to understand Crown Crafts' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$2.2m due 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 Crown Crafts 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 Crown Crafts' Profit Performance

Because unusual items detracted from Crown Crafts' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Crown Crafts' statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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 Crown Crafts at this point in time. In terms of investment risks, we've identified 3 warning signs with Crown Crafts, and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Crown Crafts' 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.