Charles River Laboratories International (NYSE:CRL) Strong Profits May Be Masking Some Underlying Issues

Charles River Laboratories International, Inc. (NYSE:CRL) just released a solid earnings report, and the stock displayed some strength. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

Check out our latest analysis for Charles River Laboratories International

How Do Unusual Items Influence Profit?

For anyone who wants to understand Charles River Laboratories International's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from US$55m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Charles River Laboratories International's Profit Performance

Arguably, Charles River Laboratories International's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Charles River Laboratories International's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 26% per annum growth in EPS for the last three. 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 Charles River Laboratories International at this point in time. In terms of investment risks, we've identified 1 warning sign with Charles River Laboratories International, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Charles River Laboratories International's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying 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.