Does Huchems Fine Chemical's (KRX:069260) Statutory Profit Adequately Reflect Its Underlying Profit?

As a general rule, we think profitable companies are less risky than companies that lose money. That said, the current statutory profit is not always a good guide to a company's underlying profitability. Today we'll focus on whether this year's statutory profits are a good guide to understanding Huchems Fine Chemical (KRX:069260).

While Huchems Fine Chemical was able to generate revenue of ₩604.6b in the last twelve months, we think its profit result of ₩48.2b was more important. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

See our latest analysis for Huchems Fine Chemical

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Huchems Fine Chemical's statutory earnings. 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.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Huchems Fine Chemical's profit was reduced by ₩10b, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Huchems Fine Chemical doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Huchems Fine Chemical's Profit Performance

Unusual items (expenses) detracted from Huchems Fine Chemical's earnings over the last year, but we might see an improvement next year. Because of this, we think Huchems Fine Chemical's earnings potential is at least as good as it seems, and maybe even better! 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. If you'd like to know more about Huchems Fine Chemical as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Huchems Fine Chemical has 1 warning sign and it would be unwise to ignore it.

This note has only looked at a single factor that sheds light on the nature of Huchems Fine Chemical'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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