Are Englewood Lab's (KOSDAQ:950140) Statutory Earnings A Good Reflection Of Its Earnings Potential?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. 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 Englewood Lab (KOSDAQ:950140).

It's good to see that over the last twelve months Englewood Lab made a profit of ₩2.01b on revenue of ₩134.3b. The chart below shows that revenue has improved over the last three years, and, even better, the company has moved from unprofitable to profitable.

Check out our latest analysis for Englewood Lab

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 Englewood Lab's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Englewood Lab.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Englewood Lab's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩955m 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 Englewood Lab to produce a higher profit next year, all else being equal.

Our Take On Englewood Lab's Profit Performance

Because unusual items detracted from Englewood Lab's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Englewood Lab's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. 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. If you'd like to know more about Englewood Lab as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Englewood Lab, and understanding these should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Englewood Lab's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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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