There May Be Reason For Hope In Daewon Pharmaceutical's (KRX:003220) Disappointing Earnings

The market for Daewon Pharmaceutical Co., Ltd.'s (KRX:003220) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

See our latest analysis for Daewon Pharmaceutical

How Do Unusual Items Influence 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 ₩4.5b 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Daewon Pharmaceutical to produce a higher profit next year, all else being equal.

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

Unusual items (expenses) detracted from Daewon Pharmaceutical's earnings over the last year, but we might see an improvement next year. Because of this, we think Daewon Pharmaceutical's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 38% per year over the last three years. 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 Daewon Pharmaceutical at this point in time. While conducting our analysis, we found that Daewon Pharmaceutical has 3 warning signs and it would be unwise to ignore these bad boys.

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