Weak Statutory Earnings May Not Tell The Whole Story For Hwang Kum Steel & Technology (KRX:032560)

Hwang Kum Steel & Technology Co., Ltd's (KRX:032560) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Check out our latest analysis for Hwang Kum Steel & Technology

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Hwang Kum Steel & Technology's profit received a boost of ₩3.5b in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hwang Kum Steel & Technology.

Our Take On Hwang Kum Steel & Technology's Profit Performance

Arguably, Hwang Kum Steel & Technology's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Hwang Kum Steel & Technology's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 3 warning signs with Hwang Kum Steel & Technology, and understanding these bad boys should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Hwang Kum Steel & Technology'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. 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.