Yahoo Finance Coca-Cola (NYSE:KO) Is Posting Promising Earnings But The Good News Doesn’t Stop There
The Coca-Cola Company's (NYSE:KO) solid earnings announcement recently didn't do much to the stock price. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.
Check out our latest analysis for Coca-Cola
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Coca-Cola's profit was reduced by US$2.4b, 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Coca-Cola 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 Coca-Cola's Profit Performance
Because unusual items detracted from Coca-Cola's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Coca-Cola's statutory profit actually understates its earnings potential! And the EPS is up 32% annually, over the last three years. 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 Coca-Cola, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Coca-Cola, and understanding these bad boys should be part of your investment process.
This note has only looked at a single factor that sheds light on the nature of Coca-Cola's 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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
