Alibaba Group Holding Limited (NYSE:BABA) recently posted some strong earnings, and the market responded positively. We have done some analysis, and we found several positive factors beyond the profit numbers.
The Impact Of Unusual Items On Profit
To properly understand Alibaba Group Holding's profit results, we need to consider the CN¥35b expense attributed to unusual items. 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. If Alibaba Group Holding 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 Alibaba Group Holding's Profit Performance
Because unusual items detracted from Alibaba Group Holding'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 Alibaba Group Holding's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 14% over 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 Alibaba Group Holding, you'd also look into what risks it is currently facing. For example - Alibaba Group Holding has 1 warning sign we think you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Alibaba Group Holding's profit. But there are plenty of other ways to inform your opinion of a company. 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.