Should You Use Sebang Global Battery's (KRX:004490) Statutory Earnings To Analyse It?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Sebang Global Battery's (KRX:004490) statutory profits are a good guide to its underlying earnings.

We like the fact that Sebang Global Battery made a profit of ₩73.9b on its revenue of ₩1.21t, in the last year. In the chart below, you can see that its profit and revenue have both grown over the last three years, although its profit has slipped in the last twelve months.

View our latest analysis for Sebang Global Battery

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted Sebang Global Battery's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sebang Global Battery.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sebang Global Battery's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩6.7b 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 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. Which is hardly surprising, given the name. 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).

Our Take On Sebang Global Battery's Profit Performance

Arguably, Sebang Global Battery's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Sebang Global Battery's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 11% per annum growth in EPS for the last three. 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 want to do dive deeper into Sebang Global Battery, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Sebang Global Battery, and understanding it should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Sebang Global Battery's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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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