Are HanmiGlobal's (KRX:053690) Statutory Earnings A Good Guide To Its Underlying Profitability?

As a general rule, we think profitable companies are less risky than companies that lose money. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding HanmiGlobal (KRX:053690).

It's good to see that over the last twelve months HanmiGlobal made a profit of ₩7.42b on revenue of ₩230.5b. As you can see in the chart below, its profit has declined over the last three years, even though its revenue has increased.

View our latest analysis for HanmiGlobal

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will discuss how unusual items have impacted HanmiGlobal's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of HanmiGlobal.

How Do Unusual Items Influence Profit?

To properly understand HanmiGlobal's profit results, we need to consider the ₩1.1b gain attributed to 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. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Our Take On HanmiGlobal's Profit Performance

Arguably, HanmiGlobal's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that HanmiGlobal's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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 HanmiGlobal, you'd also look into what risks it is currently facing. For example - HanmiGlobal has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of HanmiGlobal's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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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