Are Humedix's (KOSDAQ:200670) Statutory Earnings A Good Reflection Of Its Earnings Potential?

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. In this article, we'll look at how useful this year's statutory profit is, when analysing Humedix (KOSDAQ:200670).

It's good to see that over the last twelve months Humedix made a profit of ₩11.3b on revenue of ₩85.7b. We can see in the depiction below that while it did manage to grow its revenue over the last three years, profit has been pretty flat.

See our latest analysis for Humedix

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted Humedix's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Humedix.

The Impact Of Unusual Items On Profit

To properly understand Humedix's profit results, we need to consider the ₩2.3b gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 Humedix doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On Humedix's Profit Performance

Arguably, Humedix's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Humedix's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 23% EPS growth in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Humedix at this point in time. When we did our research, we found 2 warning signs for Humedix (1 shouldn't be ignored!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Humedix's profit. But there are plenty of other ways to inform your opinion of a company. 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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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