Should You Rely On Taeyoung Engineering & ConstructionLtd's (KRX:009410) Earnings Growth?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. 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. Today we'll focus on whether this year's statutory profits are a good guide to understanding Taeyoung Engineering & ConstructionLtd (KRX:009410).

We like the fact that Taeyoung Engineering & ConstructionLtd made a profit of ₩147.9b on its revenue of ₩3.54t, in the last year. In the chart below, you can see that its profit and revenue have both grown over the last three years.

Check out our latest analysis for Taeyoung Engineering & ConstructionLtd

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 focus on the impact unusual items have had on Taeyoung Engineering & ConstructionLtd's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Taeyoung Engineering & ConstructionLtd.

How Do Unusual Items Influence Profit?

To properly understand Taeyoung Engineering & ConstructionLtd's profit results, we need to consider the ₩91b 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Taeyoung Engineering & ConstructionLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Taeyoung Engineering & ConstructionLtd's Profit Performance

Unusual items (expenses) detracted from Taeyoung Engineering & ConstructionLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Taeyoung Engineering & ConstructionLtd's earnings potential is at least as good as it seems, and maybe even better! Better yet, its EPS are growing strongly, which is nice to see. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 3 warning signs for Taeyoung Engineering & ConstructionLtd you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Taeyoung Engineering & ConstructionLtd'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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