Shareholders Can Be Confident That Cosmax BTI's (KRX:044820) Earnings Are High Quality

The subdued stock price reaction suggests that Cosmax BTI, Inc.'s (KRX:044820) strong earnings didn't offer any surprises. Investors are probably missing some underlying factors which are encouraging for the future of the company.

See our latest analysis for Cosmax BTI

How Do Unusual Items Influence Profit?

For anyone who wants to understand Cosmax BTI's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩2.5b due 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. Assuming those unusual expenses don't come up again, we'd therefore expect Cosmax BTI 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 Cosmax BTI.

Our Take On Cosmax BTI's Profit Performance

Unusual items (expenses) detracted from Cosmax BTI's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Cosmax BTI's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 4 warning signs we've spotted with Cosmax BTI (including 2 which are a bit unpleasant).

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