There May Be Reason For Hope In Samhwa Networks' (KOSDAQ:046390) Disappointing Earnings

Soft earnings didn't appear to concern Samhwa Networks Co., Ltd.'s (KOSDAQ:046390) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

Check out our latest analysis for Samhwa Networks

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Samhwa Networks' profit was reduced by ₩616m, 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. Assuming those unusual expenses don't come up again, we'd therefore expect Samhwa Networks to produce a higher profit next year, all else being equal.

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

Our Take On Samhwa Networks' Profit Performance

Because unusual items detracted from Samhwa Networks' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Samhwa Networks' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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 Samhwa Networks at this point in time. While conducting our analysis, we found that Samhwa Networks has 2 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of Samhwa Networks' profit. But there are plenty of other ways to inform your opinion of a company. 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 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.