Investors were disappointed with the weak earnings posted by Grocery Outlet Holding Corp. (NASDAQ:GO ). However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

Check out our latest analysis for Grocery Outlet Holding

How Do Unusual Items Influence Profit?

To properly understand Grocery Outlet Holding's profit results, we need to consider the US$25m expense attributed to unusual items. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Grocery Outlet Holding 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 Grocery Outlet Holding's Profit Performance

Because unusual items detracted from Grocery Outlet Holding'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 Grocery Outlet Holding's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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 Grocery Outlet Holding, you'd also look into what risks it is currently facing. Case in point: We've spotted 4 warning signs for Grocery Outlet Holding you should be aware of.

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