Why Tdspharm's (KOSDAQ:464280) Shaky Earnings Are Just The Beginning Of Its Problems

A lackluster earnings announcement from Tdspharm Co., Ltd. (KOSDAQ:464280) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Tdspharm's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩441m worth of 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Tdspharm doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Tdspharm's Profit Performance

Arguably, Tdspharm's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Tdspharm's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased 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. If you'd like to know more about Tdspharm as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Tdspharm has 1 warning sign and it would be unwise to ignore this.

Today we've zoomed in on a single data point to better understand the nature of Tdspharm's 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. 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 with significant insider holdings to be useful.

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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.