We Think You Should Be Aware Of Some Concerning Factors In Pavonine's (KOSDAQ:177830) Earnings

Pavonine Co., Ltd. (KOSDAQ:177830) just released a solid earnings report, and the stock displayed some strength. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

See our latest analysis for Pavonine

How Do Unusual Items Influence Profit?

For anyone who wants to understand Pavonine's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩898m worth of unusual items. 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 Pavonine 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 Pavonine.

Our Take On Pavonine's Profit Performance

Arguably, Pavonine's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Pavonine's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 16% in the 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 Pavonine as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with Pavonine (including 1 which is a bit concerning).

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