Are Daewoo Shipbuilding & Marine Engineering's (KRX:042660) Statutory Earnings A Good Reflection Of Its Earnings Potential?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. 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. This article will consider whether Daewoo Shipbuilding & Marine Engineering's (KRX:042660) statutory profits are a good guide to its underlying earnings.

While Daewoo Shipbuilding & Marine Engineering was able to generate revenue of ₩7.55t in the last twelve months, we think its profit result of ₩150.3b was more important.

Check out our latest analysis for Daewoo Shipbuilding & Marine Engineering

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 discuss how unusual items have impacted Daewoo Shipbuilding & Marine Engineering's most recent profit results. 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.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Daewoo Shipbuilding & Marine Engineering's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩163b due 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Daewoo Shipbuilding & Marine Engineering to produce a higher profit next year, all else being equal.

Our Take On Daewoo Shipbuilding & Marine Engineering's Profit Performance

Because unusual items detracted from Daewoo Shipbuilding & Marine Engineering'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 Daewoo Shipbuilding & Marine Engineering's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Daewoo Shipbuilding & Marine Engineering (of which 2 shouldn't be ignored!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Daewoo Shipbuilding & Marine Engineering'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 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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