Yahoo Finance Some May Be Optimistic About Harvey Norman Holdings' (ASX:HVN) Earnings
The most recent earnings report from Harvey Norman Holdings Limited (ASX:HVN) was disappointing for shareholders. Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.
See our latest analysis for Harvey Norman Holdings
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Harvey Norman Holdings' profit was reduced by AU$71m, due to unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Harvey Norman Holdings to produce a higher profit next year, all else being equal.
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 Harvey Norman Holdings' Profit Performance
Unusual items (expenses) detracted from Harvey Norman Holdings' earnings over the last year, but we might see an improvement next year. Because of this, we think Harvey Norman Holdings' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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 Harvey Norman Holdings at this point in time. In terms of investment risks, we've identified 2 warning signs with Harvey Norman Holdings, and understanding these should be part of your investment process.
Today we've zoomed in on a single data point to better understand the nature of Harvey Norman Holdings' 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.
