Stock Analysis

Kojamo Oyj's (HEL:KOJAMO) Earnings Are Growing But Is There More To The Story?

HLSE:KOJAMO
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Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding Kojamo Oyj (HEL:KOJAMO).

While Kojamo Oyj was able to generate revenue of €382.0m in the last twelve months, we think its profit result of €830.6m was more important. One positive is that it has grown both its profit and its revenue, over the last few years.

See our latest analysis for Kojamo Oyj

earnings-and-revenue-history
HLSE:KOJAMO Earnings and Revenue History December 8th 2020

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted Kojamo Oyj's most recent profit results. 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.

The Impact Of Unusual Items On Profit

To properly understand Kojamo Oyj's profit results, we need to consider the €874m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Kojamo Oyj's positive unusual items were quite significant relative to its profit in the year to September 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On Kojamo Oyj's Profit Performance

As we discussed above, we think the significant positive unusual item makes Kojamo Oyj'searnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Kojamo Oyj's underlying earnings power is lower than its statutory profit. But on the bright side, 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 3 warning signs we've spotted with Kojamo Oyj (including 1 which is significant).

Today we've zoomed in on a single data point to better understand the nature of Kojamo Oyj'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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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