Outbrain's (NASDAQ:OB) Profits May Not Reveal Underlying Issues

The market shrugged off Outbrain Inc.'s (NASDAQ:OB) solid earnings report. We think that investors might be worried about some concerning underlying factors.

Check out our latest analysis for Outbrain

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Outbrain's profit received a boost of US$20m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Outbrain had a rather significant contribution from unusual items relative to its profit to December 2023. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 Outbrain's Profit Performance

As we discussed above, we think the significant positive unusual item makes Outbrain's earnings a poor guide to its underlying profitability. For this reason, we think that Outbrain's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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 want to do dive deeper into Outbrain, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for Outbrain you should know about.

Today we've zoomed in on a single data point to better understand the nature of Outbrain's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.