Cracker Barrel Old Country Store (NASDAQ:CBRL) Is Posting Promising Earnings But The Good News Doesn’t Stop There

The market seemed underwhelmed by the solid earnings posted by Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) recently. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

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Importantly, our data indicates that Cracker Barrel Old Country Store’s profit was reduced by US$17m, 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 that’s hardly a surprise given these line items are considered unusual. If Cracker Barrel Old Country Store 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.

Having already discussed the impact of the unusual items, we should also note that Cracker Barrel Old Country Store received a tax benefit of US$8.7m. It’s always a bit noteworthy when a company is paid by the tax man, rather than paying the tax man. Of course, prima facie it’s great to receive a tax benefit. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. In the likely event the tax benefit is not repeated, we’d expect to see its statutory profit levels drop, at least in the absence of strong growth.

In its last report Cracker Barrel Old Country Store received a tax benefit which might make its profit look better than it really is on a underlying level. Having said that, it also had a unusual item reducing its profit. Considering the aforementioned, we think that Cracker Barrel Old Country Store’s profits are probably a reasonable reflection of its underlying profitability; although we’d be confident in that conclusion if we saw a cleaner set of results. 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. In terms of investment risks, we’ve identified 3 warning signs with Cracker Barrel Old Country Store, and understanding them should be part of your investment process.

In this article we’ve looked at a number of factors that can impair the utility of profit numbers, as a guide to a business. 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.