We Think You Can Look Beyond DaeChang Steel's (KOSDAQ:140520) Lackluster Earnings

The market for DaeChang Steel Co., Ltd.'s (KOSDAQ:140520) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for DaeChang Steel

How Do Unusual Items Influence Profit?

For anyone who wants to understand DaeChang Steel's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩638m 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect DaeChang Steel 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 DaeChang Steel.

Our Take On DaeChang Steel's Profit Performance

Unusual items (expenses) detracted from DaeChang Steel's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that DaeChang Steel's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 3 warning signs for DaeChang Steel you should know about.

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