Does Hyundai Home Shopping Network's (KRX:057050) Statutory Profit Adequately Reflect Its Underlying Profit?

Broadly speaking, profitable businesses are less risky than unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether Hyundai Home Shopping Network's (KRX:057050) statutory profits are a good guide to its underlying earnings.

While Hyundai Home Shopping Network was able to generate revenue of ₩2.26t in the last twelve months, we think its profit result of ₩89.9b was more important. 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 Hyundai Home Shopping Network

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Hyundai Home Shopping Network's statutory earnings. 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.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Hyundai Home Shopping Network's profit was reduced by ₩45b, due to unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Hyundai Home Shopping Network to produce a higher profit next year, all else being equal.

Our Take On Hyundai Home Shopping Network's Profit Performance

Because unusual items detracted from Hyundai Home Shopping Network'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 Hyundai Home Shopping Network's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in 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. While conducting our analysis, we found that Hyundai Home Shopping Network has 2 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of Hyundai Home Shopping Network'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.
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