There may be fundamental issues with the quality of Restaurant Brands International’s (NYSE:QSR) earnings

Restaurant Brands International Inc. (NYSE:QSR) reported strong earnings, but the stock was flat. Our analysis suggests shareholders noticed something troubling in the numbers.

Check out our latest analysis for Restaurant Brands International

An unusual tax situation

Restaurant Brands International reported a tax benefit of $198 million, which is certainly worth noting. It’s always notable when a company gets paid by the taxman rather than paying the taxman. We’re sure the company was happy with its tax benefit. The devil is in the details, though: these types of benefits only have an impact in the year they are booked and are often one-off in nature. In the likely event that the tax benefit is not repeated, we would expect statutory profit levels to fall, at least unless strong growth is achieved.

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 Restaurant Brands International’s earnings performance

Restaurant Brands International stated in its last report that it received a tax benefit and paid no taxes. Therefore, we do not believe that its earnings result, which includes this tax benefit, is a good indicator of its sustainable profit levels. Therefore, it seems possible to us that Restaurant Brands International’s true underlying earnings power is actually less than its statutory profit. But the positive side is that its earnings per share have grown at an extremely impressive rate over the past three years. The goal of this article was to assess how well we can trust the statutory profit to reflect the company’s potential, but there is much more to consider. With that in mind, it is important to be informed of the risks involved if you want to conduct further analysis of the company. A case in point: We have noted 2 warning signs for Restaurant Brands International You should be on your guard, and we don’t particularly like one of these bad boys.

Today we’ve focused on a single data point to better understand the nature of Restaurant Brands International’s earnings. But there are plenty of other ways to form an opinion about a company. Some people consider a high return on equity to be a good sign of a high-quality company. Although this may require a bit of research, you may find that free Collection of companies with high return on equity or this list of stocks with significant insider holdings may prove useful.

Do you have feedback on this article? Are you concerned about the content? Contact us directly from us. Alternatively, send an email to editorial-team (at) simplywallst.com.

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.