Statutory Profit Doesn't Reflect How Good Sigong Tech's (KOSDAQ:020710) Earnings Are

Even though Sigong Tech Co., Ltd.'s (KOSDAQ:020710) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sigong Tech's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩742m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Sigong Tech doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Sigong Tech's Profit Performance

Unusual items (expenses) detracted from Sigong Tech's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Sigong Tech's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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'd like to know more about Sigong Tech as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 2 warning signs for Sigong Tech and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Sigong Tech'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 with significant insider holdings to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.