When companies post strong earnings, the stock generally performs well, just like DigitalOcean Holdings, Inc.'s (NYSE:DOCN) stock has recently. We did some digging and found some further encouraging factors that investors will like.

View our latest analysis for DigitalOcean Holdings

How Do Unusual Items Influence Profit?

Importantly, our data indicates that DigitalOcean Holdings' profit was reduced by US$13m, due to unusual items, over the last year. 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 DigitalOcean Holdings 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 DigitalOcean Holdings' Profit Performance

Unusual items (expenses) detracted from DigitalOcean Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that DigitalOcean Holdings' 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 year. 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. So while earnings quality is important, it's equally important to consider the risks facing DigitalOcean Holdings at this point in time. At Simply Wall St, we found 2 warning signs for DigitalOcean Holdings and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of DigitalOcean Holdings' 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.