We Think Brinker International's (NYSE:EAT) Robust Earnings Are Conservative

Even though Brinker International, Inc.'s (NYSE:EAT) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

View our latest analysis for Brinker International

The Impact Of Unusual Items On Profit

For anyone who wants to understand Brinker International's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$42m due 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 that's hardly a surprise given these line items are considered unusual. If Brinker International 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 Brinker International's Profit Performance

Unusual items (expenses) detracted from Brinker International's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Brinker International's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 26% per year 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 2 warning signs for Brinker International and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Brinker International's 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. 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.