DongKoo Bio & Pharma's (KOSDAQ:006620) Soft Earnings Don't Show The Whole Picture

Shareholders appeared unconcerned with DongKoo Bio & Pharma Co., Ltd.'s (KOSDAQ:006620) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand DongKoo Bio & Pharma's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩6.8b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. DongKoo Bio & Pharma took a rather significant hit from unusual items in the year to December 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of DongKoo Bio & Pharma.

Our Take On DongKoo Bio & Pharma's Profit Performance

As we discussed above, we think the significant unusual expense will make DongKoo Bio & Pharma's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that DongKoo Bio & Pharma's statutory profit actually understates its earnings potential! 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 5 warning signs for DongKoo Bio & Pharma you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of DongKoo Bio & Pharma's 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.