Some Investors May Be Willing To Look Past RCI Hospitality Holdings' (NASDAQ:RICK) Soft Earnings

Shareholders appeared unconcerned with RCI Hospitality Holdings, Inc.'s (NASDAQ:RICK) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for RCI Hospitality Holdings

The Impact Of Unusual Items On Profit

To properly understand RCI Hospitality Holdings' profit results, we need to consider the US$17m 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. 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 RCI Hospitality 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 RCI Hospitality Holdings' Profit Performance

Unusual items (expenses) detracted from RCI Hospitality Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that RCI Hospitality Holdings' statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the 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. 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. At Simply Wall St, we found 3 warning signs for RCI Hospitality Holdings and we think they deserve your attention.

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. 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. 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.