We Think TCC Steel's (KRX:002710) Solid Earnings Are Understated

The market seemed underwhelmed by the solid earnings posted by TCC Steel Corp. (KRX:002710) recently. Along with the solid headline numbers, we think that investors have some reasons for optimism.

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How Do Unusual Items Influence Profit?

To properly understand TCC Steel's profit results, we need to consider the ₩3.2b expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 TCC Steel 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 TCC Steel's Profit Performance

Unusual items (expenses) detracted from TCC Steel's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that TCC Steel'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 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 TCC Steel, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with TCC Steel, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of TCC Steel'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 with significant insider holdings to be useful.

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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.