Investors Can Find Comfort In LOTTE Fine Chemical's (KRX:004000) Earnings Quality

LOTTE Fine Chemical Co., Ltd.'s (KRX:004000) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

See our latest analysis for LOTTE Fine Chemical

The Impact Of Unusual Items On Profit

For anyone who wants to understand LOTTE Fine Chemical's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩108b 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. 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. LOTTE Fine Chemical took a rather significant hit from unusual items in the year to March 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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 LOTTE Fine Chemical's Profit Performance

As we mentioned previously, the LOTTE Fine Chemical's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that LOTTE Fine Chemical's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in 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. If you'd like to know more about LOTTE Fine Chemical as a business, it's important to be aware of any risks it's facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of LOTTE Fine Chemical.

This note has only looked at a single factor that sheds light on the nature of LOTTE Fine Chemical'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. 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.