TKG Huchems' (KRX:069260) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from TKG Huchems Co., Ltd. (KRX:069260) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for TKG Huchems

The Impact Of Unusual Items On Profit

To properly understand TKG Huchems' profit results, we need to consider the ₩9.6b gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. If TKG Huchems doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 TKG Huchems' Profit Performance

Arguably, TKG Huchems' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that TKG Huchems' statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 37% over the last three years. 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. If you'd like to know more about TKG Huchems as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for TKG Huchems you should be aware of.

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