Why GS Engineering & Construction's (KRX:006360) Earnings Are Better Than They Seem

The market seemed underwhelmed by last week's earnings announcement from GS Engineering & Construction Corporation (KRX:006360) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

The Impact Of Unusual Items On Profit

To properly understand GS Engineering & Construction's profit results, we need to consider the ₩33b expense attributed 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 GS Engineering & Construction 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 GS Engineering & Construction's Profit Performance

Unusual items (expenses) detracted from GS Engineering & Construction's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that GS Engineering & Construction's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. 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. If you want to do dive deeper into GS Engineering & Construction, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for GS Engineering & Construction and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of GS Engineering & Construction'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.