Shareholders Can Be Confident That Zimmer Biomet Holdings' (NYSE:ZBH) Earnings Are High Quality

Even though Zimmer Biomet Holdings, Inc.'s (NYSE:ZBH) recent earnings release was robust, the market didn't seem to notice. Our analysis suggests that investors might be missing some promising details.

View our latest analysis for Zimmer Biomet Holdings

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zimmer Biomet Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$309m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Zimmer Biomet Holdings 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 Zimmer Biomet Holdings' Profit Performance

Unusual items (expenses) detracted from Zimmer Biomet Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Zimmer Biomet Holdings' statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Zimmer Biomet Holdings you should know about.

Today we've zoomed in on a single data point to better understand the nature of Zimmer Biomet Holdings' 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.