We Think You Should Be Aware Of Some Concerning Factors In Daesung Energy's (KRX:117580) Earnings

The recent earnings posted by Daesung Energy Co., Ltd. (KRX:117580) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Daesung Energy

The Impact Of Unusual Items On Profit

To properly understand Daesung Energy's profit results, we need to consider the ₩1.8b gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On Daesung Energy's Profit Performance

Arguably, Daesung Energy's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Daesung Energy's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 8.7% in 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 Daesung Energy, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Daesung Energy you should be mindful of and 1 of these is a bit unpleasant.

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