There May Be Reason For Hope In LG Uplus' (KRX:032640) Disappointing Earnings

Soft earnings didn't appear to concern LG Uplus Corp.'s (KRX:032640) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for LG Uplus

The Impact Of Unusual Items On Profit

For anyone who wants to understand LG Uplus' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩435b due 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, after all, that's exactly what the accounting terminology implies. In the twelve months to December 2020, LG Uplus had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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.

Our Take On LG Uplus' Profit Performance

As we discussed above, we think the significant unusual expense will make LG Uplus' statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that LG Uplus' statutory profit actually understates its earnings potential! And the EPS is up 6.3% annually, over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 4 warning signs for LG Uplus you should know about.

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