We're Not So Sure You Should Rely on Young Poong Precision's (KOSDAQ:036560) 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. Today we'll focus on whether this year's statutory profits are a good guide to understanding Young Poong Precision (KOSDAQ:036560).

While Young Poong Precision was able to generate revenue of ₩84.9b in the last twelve months, we think its profit result of ₩13.6b was more important. Happily, it has grown both its profit and revenue over the last three years (though we note its profit is down over the last year).

See our latest analysis for Young Poong Precision

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Young Poong Precision's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Young Poong Precision.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Young Poong Precision's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩2.0b worth of 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 that's as you'd expect, given these boosts are described as 'unusual'. 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 Young Poong Precision's Profit Performance

Arguably, Young Poong Precision's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Young Poong Precision's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 32% 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. If you're interested we have a graphic representation of Young Poong Precision's balance sheet.

Today we've zoomed in on a single data point to better understand the nature of Young Poong Precision'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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