Some May Be Optimistic About Taekwang Industrial's (KRX:003240) Earnings

The market for Taekwang Industrial Co., Ltd.'s (KRX:003240) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Taekwang Industrial

The Impact Of Unusual Items On Profit

For anyone who wants to understand Taekwang Industrial's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩66b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. In the twelve months to December 2023, Taekwang Industrial had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Taekwang Industrial.

Our Take On Taekwang Industrial's Profit Performance

As we discussed above, we think the significant unusual expense will make Taekwang Industrial's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Taekwang Industrial's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 3 warning signs for Taekwang Industrial you should know about.

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