SAMYOUNG M-Tek (KOSDAQ:054540) Is Growing Earnings But Are They A Good Guide?

As a general rule, we think profitable companies are less risky than companies that lose money. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing SAMYOUNG M-Tek (KOSDAQ:054540).

It's good to see that over the last twelve months SAMYOUNG M-Tek made a profit of ₩8.21b on revenue of ₩74.1b. In the chart below, you can see that its profit and revenue have both grown over the last three years, although its revenue has slipped in the last twelve months.

Check out our latest analysis for SAMYOUNG M-Tek

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will discuss how unusual items have impacted SAMYOUNG M-Tek'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 SAMYOUNG M-Tek.

The Impact Of Unusual Items On Profit

For anyone who wants to understand SAMYOUNG M-Tek's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩5.0b worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. SAMYOUNG M-Tek had a rather significant contribution from unusual items relative to its profit 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 SAMYOUNG M-Tek's Profit Performance

As we discussed above, we think the significant positive unusual item makes SAMYOUNG M-Tek'searnings a poor guide to its underlying profitability. For this reason, we think that SAMYOUNG M-Tek's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But the good news is that its EPS growth over the last three years has been very impressive. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 2 warning signs for SAMYOUNG M-Tek and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of SAMYOUNG M-Tek's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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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