Hankuk Steel Wire's (KOSDAQ:025550) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The subdued market reaction suggests that Hankuk Steel Wire Co., Ltd.'s (KOSDAQ:025550) 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.

See our latest analysis for Hankuk Steel Wire

How Do Unusual Items Influence Profit?

For anyone who wants to understand Hankuk Steel Wire's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩399m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Hankuk Steel Wire doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Hankuk Steel Wire's Profit Performance

Arguably, Hankuk Steel Wire's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Hankuk Steel Wire's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 Hankuk Steel Wire at this point in time. To help with this, we've discovered 4 warning signs (2 shouldn't be ignored!) that you ought to be aware of before buying any shares in Hankuk Steel Wire.

Today we've zoomed in on a single data point to better understand the nature of Hankuk Steel Wire'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. 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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