We're Not So Sure You Should Rely on AztechWB's (KOSDAQ:032080) Statutory Earnings

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 AztechWB (KOSDAQ:032080).

While AztechWB was able to generate revenue of ₩35.1b in the last twelve months, we think its profit result of ₩2.88b was more important. As depicted below, while its revenue may have fallen over the last few years, its profit actually improved.

Check out our latest analysis for AztechWB

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

The Impact Of Unusual Items On Profit

For anyone who wants to understand AztechWB's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩1.4b worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. AztechWB had a rather significant contribution from unusual items relative to its profit to September 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On AztechWB's Profit Performance

As we discussed above, we think the significant positive unusual item makes AztechWB'searnings a poor guide to its underlying profitability. As a result, we think it may well be the case that AztechWB's underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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 want to do dive deeper into AztechWB, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for AztechWB you should be aware of.

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