Hansol Chemical's (KRX:014680) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Investors were disappointed by Hansol Chemical Co., Ltd.'s (KRX:014680 ) latest earnings release. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View our latest analysis for Hansol Chemical

How Do Unusual Items Influence Profit?

To properly understand Hansol Chemical's profit results, we need to consider the ₩18b gain attributed to unusual items. 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. 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).

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 Hansol Chemical's Profit Performance

Arguably, Hansol Chemical's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Hansol Chemical's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over 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. So while earnings quality is important, it's equally important to consider the risks facing Hansol Chemical at this point in time. Every company has risks, and we've spotted 2 warning signs for Hansol Chemical you should know about.

Today we've zoomed in on a single data point to better understand the nature of Hansol Chemical's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.