Investors Can Find Comfort In Dave & Buster's Entertainment's (NASDAQ:PLAY) Earnings Quality

Investors were disappointed with the weak earnings posted by Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

See our latest analysis for Dave & Buster's Entertainment

The Impact Of Unusual Items On Profit

To properly understand Dave & Buster's Entertainment's profit results, we need to consider the US$31m expense attributed 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Dave & Buster's Entertainment 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 Dave & Buster's Entertainment's Profit Performance

Unusual items (expenses) detracted from Dave & Buster's Entertainment's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Dave & Buster's Entertainment's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Dave & Buster's Entertainment at this point in time. For example, we've found that Dave & Buster's Entertainment has 4 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Dave & Buster's Entertainment's profit. But there are plenty of other ways to inform your opinion of a company. 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.