Adobe (NASDAQ:ADBE) Is Posting Promising Earnings But The Good News Doesn’t Stop There

Adobe Inc.'s (NASDAQ:ADBE) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

See our latest analysis for Adobe

The Impact Of Unusual Items On Profit

For anyone who wants to understand Adobe's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$969m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Adobe 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 Adobe's Profit Performance

Because unusual items detracted from Adobe'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 Adobe's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 6.8% in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with Adobe, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Adobe's 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.