Hanon Systems' (KRX:018880) Soft Earnings Don't Show The Whole Picture

Hanon Systems' (KRX:018880) recent soft profit numbers didn't appear to worry shareholders. However, we think the company is showing some signs that things are more promising than they seem.

See our latest analysis for Hanon Systems

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hanon Systems' profit was reduced by ₩40b, 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. 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 expenses don't come up again, we'd therefore expect Hanon Systems 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 Hanon Systems' Profit Performance

Unusual items (expenses) detracted from Hanon Systems' earnings over the last year, but we might see an improvement next year. Because of this, we think Hanon Systems' 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 Hanon Systems at this point in time. At Simply Wall St, we found 4 warning signs for Hanon Systems and we think they deserve your attention.

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

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This article by Simply Wall St is general in nature. 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.
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