There May Be Reason For Hope In CJ Seafood's (KRX:011150) Disappointing Earnings

The market for CJ Seafood Corporation's (KRX:011150) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

Check out our latest analysis for CJ Seafood

How Do Unusual Items Influence Profit?

To properly understand CJ Seafood's profit results, we need to consider the ₩474m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If CJ Seafood doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On CJ Seafood's Profit Performance

Because unusual items detracted from CJ Seafood's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that CJ Seafood's statutory profit actually understates its earnings potential! 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. If you want to do dive deeper into CJ Seafood, you'd also look into what risks it is currently facing. For instance, we've identified 4 warning signs for CJ Seafood (1 is a bit unpleasant) you should be familiar with.

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

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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.