Datto Holding's (NYSE:MSP) Performance Is Even Better Than Its Earnings Suggest

Datto Holding Corp.'s (NYSE:MSP) strong earnings report was rewarded with a positive stock price move. We did some digging and found some further encouraging factors that investors will like.

View our latest analysis for Datto Holding

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Datto Holding's profit was reduced by US$8.8m, 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. 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 Datto Holding 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 Datto Holding's Profit Performance

Because unusual items detracted from Datto Holding's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Datto Holding's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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 while earnings quality is important, it's equally important to consider the risks facing Datto Holding at this point in time. Case in point: We've spotted 1 warning sign for Datto Holding you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Datto Holding's 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. 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. 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.
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