We Think Haesung Industrial's (KOSDAQ:034810) Solid Earnings Are Understated

Haesung Industrial Co., Ltd.'s (KOSDAQ:034810) solid earnings announcement recently didn't do much to the stock price. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

How Do Unusual Items Influence Profit?

To properly understand Haesung Industrial's profit results, we need to consider the ₩22b expense attributed 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Haesung Industrial doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Haesung Industrial's Profit Performance

Because unusual items detracted from Haesung Industrial'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 Haesung Industrial's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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 Haesung Industrial as a business, it's important to be aware of any risks it's facing. When we did our research, we found 4 warning signs for Haesung Industrial (2 are concerning!) that we believe deserve your full attention.

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