We Like Simulations Plus' (NASDAQ:SLP) Earnings For More Than Just Statutory Profit

The stock was sluggish on the back of Simulations Plus, Inc.'s (NASDAQ:SLP) recent earnings report. Our analysis suggests that there are some reasons for hope that investors should be aware of.

Check out our latest analysis for Simulations Plus

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Simulations Plus' profit was reduced by US$4.4m, 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Simulations Plus 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 Simulations Plus' Profit Performance

Unusual items (expenses) detracted from Simulations Plus' earnings over the last year, but we might see an improvement next year. Because of this, we think Simulations Plus' earnings potential is at least as good as it seems, and maybe even better! And it's also good to see that its earnings per share have improved a bit over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Simulations Plus as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Simulations Plus you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Simulations Plus' 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 that insiders are buying 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.