Dave & Buster's Entertainment, Inc.'s (NASDAQ:PLAY) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. We think that investors might be looking at some positive factors beyond the earnings numbers.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Dave & Buster's Entertainment's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$36m 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, after all, that's exactly what the accounting terminology implies. If Dave & Buster's Entertainment 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 Dave & Buster's Entertainment's Profit Performance
Unusual items (expenses) detracted from Dave & Buster's Entertainment's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Dave & Buster's Entertainment's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you want to do dive deeper into Dave & Buster's Entertainment, you'd also look into what risks it is currently facing. For example, Dave & Buster's Entertainment has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.
This note has only looked at a single factor that sheds light on the nature of Dave & Buster's Entertainment'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.
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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.