Solid Earnings May Not Tell The Whole Story For Korea New Network (KOSDAQ:058400)

Korea New Network Co., Ltd.'s (KOSDAQ:058400) healthy profit numbers didn't contain any surprises for investors. 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 Korea New Network

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Korea New Network's profit received a boost of ₩1.3b 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. 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 Korea New Network.

Our Take On Korea New Network's Profit Performance

Arguably, Korea New Network's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Korea New Network's statutory profits are better than its underlying earnings power. The good news is that its earnings per share increased slightly in the last year. 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 while earnings quality is important, it's equally important to consider the risks facing Korea New Network at this point in time. Case in point: We've spotted 2 warning signs for Korea New Network you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Korea New Network'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 with significant insider holdings to be useful.

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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.