Why Korea Export Packaging IndustrialLtd's (KRX:002200) Shaky Earnings Are Just The Beginning Of Its Problems

A lackluster earnings announcement from Korea Export Packaging Industrial Co.,Ltd (KRX:002200) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Korea Export Packaging IndustrialLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Korea Export Packaging IndustrialLtd's profit received a boost of ₩1.4b in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Korea Export Packaging IndustrialLtd.

Our Take On Korea Export Packaging IndustrialLtd's Profit Performance

We'd posit that Korea Export Packaging IndustrialLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Korea Export Packaging IndustrialLtd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 22% per annum growth in EPS for the last three. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Korea Export Packaging IndustrialLtd you should know about.

This note has only looked at a single factor that sheds light on the nature of Korea Export Packaging IndustrialLtd'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 with high insider ownership.

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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.