We Think You Can Look Beyond Sovos Brands' (NASDAQ:SOVO) Lackluster Earnings

The market shrugged off the recent earnings report from Sovos Brands, Inc. (NASDAQ:SOVO), despite the profit numbers being soft. However, we think the company is showing some signs that things are more promising than they seem.

See our latest analysis for Sovos Brands

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Sovos Brands' profit was reduced by US$25m, due to unusual items, over the last year. 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. In the twelve months to December 2021, Sovos Brands had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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 Sovos Brands' Profit Performance

As we mentioned previously, the Sovos Brands' profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Sovos Brands' statutory profit actually understates its earnings potential! 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. Case in point: We've spotted 4 warning signs for Sovos Brands you should be mindful of and 1 of them is potentially serious.

This note has only looked at a single factor that sheds light on the nature of Sovos Brands' 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.