The most recent earnings report from Zimmer Biomet Holdings, Inc. (NYSE:ZBH) was disappointing for shareholders. While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

View our latest analysis for Zimmer Biomet Holdings

How Do Unusual Items Influence Profit?

To properly understand Zimmer Biomet Holdings' profit results, we need to consider the US$327m expense attributed 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 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 Zimmer Biomet Holdings 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 Zimmer Biomet Holdings' Profit Performance

Because unusual items detracted from Zimmer Biomet Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Zimmer Biomet Holdings' earnings potential is at least as good as it seems, and maybe even better! 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. So while earnings quality is important, it's equally important to consider the risks facing Zimmer Biomet Holdings at this point in time. At Simply Wall St, we found 2 warning signs for Zimmer Biomet Holdings and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Zimmer Biomet Holdings' 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 with significant insider holdings 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.