We Think It'S Hanbul's (KRX:226320) Profit Is Only A Baseline For What They Can Achieve

The subdued stock price reaction suggests that It'S Hanbul Co., Ltd.'s (KRX:226320) strong earnings didn't offer any surprises. Investors are probably missing some underlying factors which are encouraging for the future of the company.

View our latest analysis for It'S Hanbul

How Do Unusual Items Influence Profit?

To properly understand It'S Hanbul's profit results, we need to consider the ₩1.2b expense attributed 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect It'S Hanbul 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 It'S Hanbul.

Our Take On It'S Hanbul's Profit Performance

Because unusual items detracted from It'S Hanbul'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 It'S Hanbul's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after 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. If you want to do dive deeper into It'S Hanbul, you'd also look into what risks it is currently facing. Be aware that It'S Hanbul is showing 2 warning signs in our investment analysis and 1 of those can't be ignored...

Today we've zoomed in on a single data point to better understand the nature of It'S Hanbul'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. 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.