Investors Can Find Comfort In RCI Hospitality Holdings' (NASDAQ:RICK) Earnings Quality

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

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The Impact Of Unusual Items On Profit

To properly understand RCI Hospitality Holdings' profit results, we need to consider the US$27m 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 that's hardly a surprise given these line items are considered unusual. RCI Hospitality Holdings took a rather significant hit from unusual items in the year to March 2025. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of RCI Hospitality Holdings.

Our Take On RCI Hospitality Holdings' Profit Performance

As we mentioned previously, the RCI Hospitality Holdings' profit was hampered by unusual items in the last year. Because of this, we think RCI Hospitality Holdings' underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the last year. 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. 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. You'd be interested to know, that we found 3 warning signs for RCI Hospitality Holdings and you'll want to know about them.

This note has only looked at a single factor that sheds light on the nature of RCI Hospitality Holdings' 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. 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.