The Strong Earnings Posted By DigitalOcean Holdings (NYSE:DOCN) Are A Good Indication Of The Strength Of The Business

When companies post strong earnings, the stock generally performs well, just like DigitalOcean Holdings, Inc.'s (NYSE:DOCN) stock has recently. We have done some analysis, and we found several positive factors beyond the profit numbers.

View our latest analysis for DigitalOcean Holdings

The Impact Of Unusual Items On Profit

To properly understand DigitalOcean Holdings' profit results, we need to consider the US$13m expense attributed 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. Assuming those unusual expenses don't come up again, we'd therefore expect DigitalOcean Holdings to produce a higher profit next year, all else being equal.

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 DigitalOcean Holdings' Profit Performance

Unusual items (expenses) detracted from DigitalOcean Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that DigitalOcean Holdings' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate 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. If you want to do dive deeper into DigitalOcean Holdings, you'd also look into what risks it is currently facing. While conducting our analysis, we found that DigitalOcean Holdings has 2 warning signs and it would be unwise to ignore these.

Today we've zoomed in on a single data point to better understand the nature of DigitalOcean Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.