Hyunwoo Industrial's (KOSDAQ:092300) Earnings Are Of Questionable Quality

Despite posting some strong earnings, the market for Hyunwoo Industrial Co., LTD's (KOSDAQ:092300) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

See our latest analysis for Hyunwoo Industrial

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hyunwoo Industrial's profit received a boost of ₩1.4b in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Hyunwoo Industrial doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Hyunwoo Industrial's Profit Performance

We'd posit that Hyunwoo Industrial's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Hyunwoo Industrial's true underlying earnings power is actually less than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into Hyunwoo Industrial, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for Hyunwoo Industrial and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Hyunwoo 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.