Shareholders appeared unconcerned with ACI Worldwide, Inc.'s (NASDAQ:ACIW) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.
The Impact Of Unusual Items On Profit
For anyone who wants to understand ACI Worldwide's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$28m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If ACI Worldwide doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 ACI Worldwide's Profit Performance
Because unusual items detracted from ACI Worldwide'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 ACI Worldwide's 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 three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that ACI Worldwide has 1 warning sign and it would be unwise to ignore it.
Today we've zoomed in on a single data point to better understand the nature of ACI Worldwide's 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. 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.