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Investors Shouldn't Be Too Comfortable With Northern Bear's (LON:NTBR) Robust Earnings
Northern Bear PLC's (LON:NTBR) stock was strong after they reported robust earnings. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.
View our latest analysis for Northern Bear
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Northern Bear's profit received a boost of UK£1.4m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Northern Bear had a rather significant contribution from unusual items relative to its profit to September 2021. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Northern Bear.
Our Take On Northern Bear's Profit Performance
As we discussed above, we think the significant positive unusual item makes Northern Bear's earnings a poor guide to its underlying profitability. For this reason, we think that Northern Bear's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. If you'd like to know more about Northern Bear as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 3 warning signs (1 is a bit unpleasant!) that you ought to be aware of before buying any shares in Northern Bear.
This note has only looked at a single factor that sheds light on the nature of Northern Bear'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.
Valuation is complex, but we're here to simplify it.
Discover if Northern Bear might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About AIM:NTBR
Northern Bear
Provides building and support services to local authorities, housing associations, NHS trusts, universities, construction companies, and national house builders in Northern England and internationally.
Undervalued with excellent balance sheet and pays a dividend.