Should You Use Wonik Cube's (KOSDAQ:014190) Statutory Earnings To Analyse It?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether Wonik Cube's (KOSDAQ:014190) statutory profits are a good guide to its underlying earnings.

We like the fact that Wonik Cube made a profit of ₩8.14b on its revenue of ₩193.1b, in the last year.

See our latest analysis for Wonik Cube

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Wonik Cube's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Wonik Cube.

The Impact Of Unusual Items On Profit

To properly understand Wonik Cube's profit results, we need to consider the ₩529m expense attributed 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. Assuming those unusual expenses don't come up again, we'd therefore expect Wonik Cube to produce a higher profit next year, all else being equal.

Our Take On Wonik Cube's Profit Performance

Unusual items (expenses) detracted from Wonik Cube's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Wonik Cube's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 2 warning signs for Wonik Cube and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Wonik Cube'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. 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 that insiders are buying to be useful.

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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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