We're Not So Sure You Should Rely on Semyung Electric MachineryLtd's (KOSDAQ:017510) Statutory Earnings

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. 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 Semyung Electric MachineryLtd's (KOSDAQ:017510) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Semyung Electric MachineryLtd made a profit of ₩2.52b on revenue of ₩15.9b. The chart below shows that both revenue and profit have declined over the last three years.

See our latest analysis for Semyung Electric MachineryLtd

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 Semyung Electric MachineryLtd's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Semyung Electric MachineryLtd.

The Impact Of Unusual Items On Profit

To properly understand Semyung Electric MachineryLtd's profit results, we need to consider the ₩2.1b 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Semyung Electric MachineryLtd's positive unusual items were quite significant relative to its profit in the year to September 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Semyung Electric MachineryLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Semyung Electric MachineryLtd'searnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Semyung Electric MachineryLtd's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that Semyung Electric MachineryLtd has 3 warning signs (1 is a bit unpleasant!) that deserve your attention before going any further with your analysis.

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