Solid Earnings Reflect SolarWinds' (NYSE:SWI) Strength As A Business

SolarWinds Corporation (NYSE:SWI) recently posted some strong earnings, and the market responded positively. We did some digging and found some further encouraging factors that investors will like.

View our latest analysis for SolarWinds

How Do Unusual Items Influence Profit?

Importantly, our data indicates that SolarWinds' profit was reduced by US$27m, due to unusual items, over the last year. 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. Assuming those unusual expenses don't come up again, we'd therefore expect SolarWinds 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 SolarWinds' Profit Performance

Because unusual items detracted from SolarWinds' 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 SolarWinds' statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about SolarWinds as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with SolarWinds (including 1 which shouldn't be ignored).

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