KG Dongbu SteelLtd's (KRX:016380) Weak Earnings May Only Reveal A Part Of The Whole Picture

KG Dongbu Steel Co.,Ltd.'s (KRX:016380) stock showed strength, with investors undeterred by its weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for KG Dongbu SteelLtd.

See our latest analysis for KG Dongbu SteelLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand KG Dongbu SteelLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩32b worth of 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. 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 KG Dongbu SteelLtd's Profit Performance

We'd posit that KG Dongbu SteelLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that KG Dongbu SteelLtd's true underlying earnings power is actually less than its statutory profit. 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. If you want to do dive deeper into KG Dongbu SteelLtd, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for KG Dongbu SteelLtd and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of KG Dongbu SteelLtd'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.