Daewon Pharmaceutical's (KRX:003220) Conservative Accounting Might Explain Soft Earnings

Soft earnings didn't appear to concern Daewon Pharmaceutical Co., Ltd.'s (KRX:003220) 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 Daewon Pharmaceutical

The Impact Of Unusual Items On Profit

For anyone who wants to understand Daewon Pharmaceutical's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩5.7b due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Daewon Pharmaceutical doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Daewon Pharmaceutical's Profit Performance

Because unusual items detracted from Daewon Pharmaceutical's 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 Daewon Pharmaceutical's statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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 want to do dive deeper into Daewon Pharmaceutical, you'd also look into what risks it is currently facing. For example - Daewon Pharmaceutical has 4 warning signs we think you should be aware of.

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