We Think You Can Look Beyond Asbury Automotive Group's (NYSE:ABG) Lackluster Earnings

Shareholders appeared unconcerned with Asbury Automotive Group, Inc.'s (NYSE:ABG) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

Our free stock report includes 4 warning signs investors should be aware of before investing in Asbury Automotive Group. Read for free now.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Asbury Automotive Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$165m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Asbury Automotive Group 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 Asbury Automotive Group's Profit Performance

Because unusual items detracted from Asbury Automotive Group's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Asbury Automotive Group's earnings potential is at least as good as it seems, and maybe even better! 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. So while earnings quality is important, it's equally important to consider the risks facing Asbury Automotive Group at this point in time. To help with this, we've discovered 4 warning signs (1 makes us a bit uncomfortable!) that you ought to be aware of before buying any shares in Asbury Automotive Group.

Today we've zoomed in on a single data point to better understand the nature of Asbury Automotive Group'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.