The market shrugged off Shutterstock, Inc.'s (NYSE:SSTK) solid earnings report. We think that investors might be worried about some concerning underlying factors.
How Do Unusual Items Influence Profit?
To properly understand Shutterstock's profit results, we need to consider the US$16m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Shutterstock doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Shutterstock's Profit Performance
Arguably, Shutterstock's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shutterstock's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 14% EPS growth in 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 Shutterstock, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Shutterstock and we think they deserve your attention.
Today we've zoomed in on a single data point to better understand the nature of Shutterstock'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. 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 that insiders are buying 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.