We Think You Should Be Aware Of Some Concerning Factors In KNW's (KOSDAQ:105330) Earnings

The recent earnings posted by KNW Co., Ltd. (KOSDAQ:105330) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

See our latest analysis for KNW

How Do Unusual Items Influence Profit?

For anyone who wants to understand KNW's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩1.2b worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. We can see that KNW's positive unusual items were quite significant relative to its profit in the year to December 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

Our Take On KNW's Profit Performance

As we discussed above, we think the significant positive unusual item makes KNW's earnings a poor guide to its underlying profitability. For this reason, we think that KNW'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, its earnings per share increased by 41% in 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 KNW at this point in time. In terms of investment risks, we've identified 2 warning signs with KNW, and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of KNW's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.