Investors Can Find Comfort In Samhwa Crown & Closure's (KRX:004450) Earnings Quality

The market for Samhwa Crown & Closure Co., Ltd's (KRX:004450) 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 Samhwa Crown & Closure

How Do Unusual Items Influence Profit?

For anyone who wants to understand Samhwa Crown & Closure's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩5.6b 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, after all, that's exactly what the accounting terminology implies. In the twelve months to December 2020, Samhwa Crown & Closure had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Samhwa Crown & Closure.

Our Take On Samhwa Crown & Closure's Profit Performance

As we mentioned previously, the Samhwa Crown & Closure's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Samhwa Crown & Closure'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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 5 warning signs for Samhwa Crown & Closure you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Samhwa Crown & Closure'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. 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.
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