Shindaeyang Paper's (KRX:016590) Soft Earnings Are Actually Better Than They Appear

Investors were disappointed with the weak earnings posted by Shindaeyang Paper Co., Ltd. (KRX:016590 ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shindaeyang Paper's profit was reduced by ₩3.7b, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Shindaeyang Paper doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Shindaeyang Paper's Profit Performance

Unusual items (expenses) detracted from Shindaeyang Paper's earnings over the last year, but we might see an improvement next year. Because of this, we think Shindaeyang Paper's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Shindaeyang Paper at this point in time. To help with this, we've discovered 4 warning signs (2 don't sit too well with us!) that you ought to be aware of before buying any shares in Shindaeyang Paper.

Today we've zoomed in on a single data point to better understand the nature of Shindaeyang Paper's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.