Chonbang's (KRX:000950) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Chonbang Co., Ltd.'s (KRX:000950) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for Chonbang

The Impact Of Unusual Items On Profit

For anyone who wants to understand Chonbang's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩4.2b worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. Chonbang had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

Our Take On Chonbang's Profit Performance

As we discussed above, we think the significant positive unusual item makes Chonbang's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Chonbang's underlying earnings power is lower than its statutory profit. 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. So while earnings quality is important, it's equally important to consider the risks facing Chonbang at this point in time. While conducting our analysis, we found that Chonbang has 3 warning signs and it would be unwise to ignore these.

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