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Shareholders appeared unconcerned with Amdocs Limited's (NASDAQ:DOX) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.
View our latest analysis for Amdocs
The Impact Of Unusual Items On Profit
For anyone who wants to understand Amdocs' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$131m 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Amdocs 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 Amdocs' Profit Performance
Because unusual items detracted from Amdocs' 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 Amdocs' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. Obviously, we love to consider the historical data to inform our opinion of a company. But it can be really valuable to consider what other analysts are forecasting. So feel free to check out our free graph representing analyst forecasts.
This note has only looked at a single factor that sheds light on the nature of Amdocs' 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.