HDC Hyundai Engineering Plastics' (KRX:089470) Soft Earnings Are Actually Better Than They Appear

Soft earnings didn't appear to concern HDC Hyundai Engineering Plastics Co., Ltd.'s (KRX:089470) shareholders over the last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for HDC Hyundai Engineering Plastics

How Do Unusual Items Influence Profit?

For anyone who wants to understand HDC Hyundai Engineering Plastics' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩11b due to unusual items. 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect HDC Hyundai Engineering Plastics to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of HDC Hyundai Engineering Plastics.

Our Take On HDC Hyundai Engineering Plastics' Profit Performance

Unusual items (expenses) detracted from HDC Hyundai Engineering Plastics' earnings over the last year, but we might see an improvement next year. Because of this, we think HDC Hyundai Engineering Plastics' earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that HDC Hyundai Engineering Plastics has 5 warning signs (2 make us uncomfortable!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of HDC Hyundai Engineering Plastics' 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 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.