Walmart Inc. (NYSE:WMT) recently posted strong earnings and the market reacted positively. We did some analysis and found several positive factors besides the earnings numbers.

Check out our latest analysis for Walmart

The impact of unusual items on profit

To properly understand Walmart’s earnings numbers, we need to consider the $3.4 billion in unusual item expenses. It’s never nice when unusual items cost the company profits, but the bright side is that things could improve sooner rather than later. We’ve looked at thousands of publicly traded companies and found that unusual items are very often one-time in nature. And that’s exactly what the accounting terminology implies. Therefore, assuming these unusual expenses don’t recur, we would expect Walmart to post higher profits next year, all else being equal.

You may be wondering what analysts are predicting in terms of future profitability. Fortunately, you can click here to see an interactive chart depicting future profitability based on their estimates.

Our assessment of Walmart’s earnings development

Since unusual items have hurt Walmart’s earnings over the last year, one could argue that we can expect improved earnings in the current quarter. For this reason, we believe Walmart’s earnings potential is at least as good as it seems, and maybe even better! And earnings per share have grown 62% annually over the past three years. Ultimately, it’s important to consider more than just the factors above if you want to properly understand the company. While the quality of earnings is important, it’s equally important to consider the risks Walmart is currently facing. Every company has risks, and we’ve found 1 warning sign for Walmart You should know about this.

Today we’ve focused on a single data point to better understand the nature of Walmart’s profit. But there’s always more to discover if you’re able to dig deeper. Some people consider a high return on equity to be a good sign of a quality company. You might want to check it out here. free Collection of companies with high return on equity or this list of stocks with high insider ownership.

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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.