Are Wooridul Pharmaceutical's (KRX:004720) 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. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. In this article, we'll look at how useful this year's statutory profit is, when analysing Wooridul Pharmaceutical (KRX:004720).

It's good to see that over the last twelve months Wooridul Pharmaceutical made a profit of ₩2.20b on revenue of ₩94.3b. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

Check out our latest analysis for Wooridul Pharmaceutical

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. In this article we'll look at how Wooridul Pharmaceutical is impacting shareholders by issuing new shares. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Wooridul Pharmaceutical.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Wooridul Pharmaceutical increased the number of shares on issue by 19% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of Wooridul Pharmaceutical's EPS by clicking here.

How Is Dilution Impacting Wooridul Pharmaceutical's Earnings Per Share? (EPS)

Unfortunately, Wooridul Pharmaceutical's profit is down 55% per year over three years. Even looking at the last year, profit was still down 4.3%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 14% in the same period. So you can see that the dilution has had a bit of an impact on shareholders. Therefore, the dilution is having a noteworthy influence on shareholder returns. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Wooridul Pharmaceutical's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Our Take On Wooridul Pharmaceutical's Profit Performance

Over the last year Wooridul Pharmaceutical issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that Wooridul Pharmaceutical's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 2 warning signs for Wooridul Pharmaceutical and you'll want to know about them.

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

When trading Wooridul Pharmaceutical or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.