Golden Ocean Group's (NASDAQ:GOGL) Earnings Are Of Questionable Quality

Despite posting some strong earnings, the market for Golden Ocean Group Limited's (NASDAQ:GOGL) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Golden Ocean Group's profit received a boost of US$21m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 that's as you'd expect, given these boosts are described as 'unusual'. 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).

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 Golden Ocean Group's Profit Performance

Arguably, Golden Ocean Group's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Golden Ocean Group's statutory profits are better than its underlying earnings power. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 2 warning signs with Golden Ocean Group, and understanding them should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Golden Ocean Group'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.