Inter-M's (KOSDAQ:017250) Soft Earnings Are Actually Better Than They Appear

Inter-M Corporation's (KOSDAQ:017250) stock was strong despite it releasing a soft earnings report last week. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for Inter-M

How Do Unusual Items Influence Profit?

For anyone who wants to understand Inter-M's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩1.6b due to unusual items. 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 that's hardly a surprise given these line items are considered unusual. If Inter-M doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Inter-M.

Our Take On Inter-M's Profit Performance

Because unusual items detracted from Inter-M'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 Inter-M's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Inter-M at this point in time. You'd be interested to know, that we found 3 warning signs for Inter-M and you'll want to know about these.

This note has only looked at a single factor that sheds light on the nature of Inter-M's profit. But there are plenty of other ways to inform your opinion of a company. 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.