Does JVM's (KOSDAQ:054950) Statutory Profit Adequately Reflect Its Underlying Profit?

As a general rule, we think profitable companies are less risky than companies that lose money. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. In this article, we'll look at how useful this year's statutory profit is, when analysing JVM (KOSDAQ:054950).

It's good to see that over the last twelve months JVM made a profit of ₩7.31b on revenue of ₩116.2b. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

View our latest analysis for JVM

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on JVM's statutory earnings. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

The Impact Of Unusual Items On Profit

To properly understand JVM's profit results, we need to consider the ₩3.0b 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 JVM to produce a higher profit next year, all else being equal.

Our Take On JVM's Profit Performance

Because unusual items detracted from JVM's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think JVM's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 26% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into JVM, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for JVM and you'll want to know about these.

This note has only looked at a single factor that sheds light on the nature of JVM'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. 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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