There May Be Underlying Issues With The Quality Of NOROO Holdings' (KRX:000320) Earnings

NOROO Holdings Co., Ltd. (KRX:000320) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

We've discovered 2 warning signs about NOROO Holdings. View them for free.

How Do Unusual Items Influence Profit?

For anyone who wants to understand NOROO Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩18b worth of 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On NOROO Holdings' Profit Performance

We'd posit that NOROO Holdings' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that NOROO Holdings' statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 44% 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 2 warning signs for NOROO Holdings and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of NOROO Holdings' 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.