Stock Analysis

Samchuly Bicycle's (KOSDAQ:024950) Earnings Are Of Questionable Quality

KOSDAQ:A024950
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Investors were disappointed with Samchuly Bicycle Co., Ltd's (KOSDAQ:024950) earnings, despite the strong profit numbers. We think that the market might be paying attention to some underlying factors are concerning.

View our latest analysis for Samchuly Bicycle

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KOSDAQ:A024950 Earnings and Revenue History March 15th 2021

How Do Unusual Items Influence Profit?

For anyone who wants to understand Samchuly Bicycle's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩4.6b worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Samchuly Bicycle's positive unusual items were quite significant relative to its profit in the year to December 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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.

Our Take On Samchuly Bicycle's Profit Performance

As we discussed above, we think the significant positive unusual item makes Samchuly Bicycle's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Samchuly Bicycle's underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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 while earnings quality is important, it's equally important to consider the risks facing Samchuly Bicycle at this point in time. In terms of investment risks, we've identified 3 warning signs with Samchuly Bicycle, and understanding these bad boys should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Samchuly Bicycle'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. 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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