We Think Hotel ShillaLtd's (KRX:008770) Healthy Earnings Might Be Conservative

Hotel Shilla Co.,Ltd's (KRX:008770) solid earnings announcement recently didn't do much to the stock price. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

View our latest analysis for Hotel ShillaLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Hotel ShillaLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩24b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Hotel ShillaLtd 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 Hotel ShillaLtd's Profit Performance

Unusual items (expenses) detracted from Hotel ShillaLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Hotel ShillaLtd's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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 Hotel ShillaLtd at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Hotel ShillaLtd.

This note has only looked at a single factor that sheds light on the nature of Hotel ShillaLtd'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. 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 that insiders are buying 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.