TPC's (KOSDAQ:130740) Solid Profits Have Weak Fundamentals

Investors were disappointed with TPC Co., Ltd.'s (KOSDAQ:130740) earnings, despite the strong profit numbers. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

View our latest analysis for TPC

The Impact Of Unusual Items On Profit

For anyone who wants to understand TPC's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩557m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. TPC had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On TPC's Profit Performance

As we discussed above, we think the significant positive unusual item makes TPC's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that TPC's underlying earnings power is lower than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing TPC at this point in time. At Simply Wall St, we found 2 warning signs for TPC and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of TPC'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. 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.