The Strong Earnings Posted By Spir Group (OB:SPIR) Are A Good Indication Of The Strength Of The Business

Investors were underwhelmed by the solid earnings posted by Spir Group ASA (OB:SPIR) recently. Our analysis says that investors should be optimistic, as the strong profit is built on solid foundations.

Check out our latest analysis for Spir Group

How Do Unusual Items Influence Profit?

To properly understand Spir Group's profit results, we need to consider the kr17m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Spir Group doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Spir Group.

Our Take On Spir Group's Profit Performance

Because unusual items detracted from Spir Group'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 Spir Group's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. 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 Spir Group, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for Spir Group (1 is a bit concerning!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Spir Group'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.