Some Investors May Be Willing To Look Past Connectwave's (KOSDAQ:119860) Soft Earnings

Investors were disappointed with the weak earnings posted by Connectwave Co., Ltd. (KOSDAQ:119860 ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

Check out our latest analysis for Connectwave

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Connectwave's profit was reduced by ₩7.2b, 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 Connectwave 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 Connectwave.

Our Take On Connectwave's Profit Performance

Because unusual items detracted from Connectwave's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Connectwave'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. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 4 warning signs for Connectwave (1 is significant!) that we believe deserve your full attention.

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