We Like Kolmar Korea's (KRX:161890) Earnings For More Than Just Statutory Profit

The market seemed underwhelmed by last week's earnings announcement from Kolmar Korea Co., Ltd. (KRX:161890) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

See our latest analysis for Kolmar Korea

The Impact Of Unusual Items On Profit

For anyone who wants to understand Kolmar Korea's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩27b due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. 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 Kolmar Korea 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 Kolmar Korea's Profit Performance

Unusual items (expenses) detracted from Kolmar Korea's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Kolmar Korea's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Kolmar Korea at this point in time. Case in point: We've spotted 2 warning signs for Kolmar Korea you should be aware of.

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