There May Be Reason For Hope In Aluko's (KRX:001780) Disappointing Earnings

Investors were disappointed with the weak earnings posted by Aluko Co., Ltd. (KRX:001780 ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Aluko's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩6.3b due 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 that's hardly a surprise given these line items are considered unusual. If Aluko 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 Aluko's Profit Performance

Unusual items (expenses) detracted from Aluko's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Aluko's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 5.6% per year 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Aluko has 2 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Aluko's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.