Iljeong IndustrialLtd's (KRX:008500) Problems Go Beyond Weak Profit

The market wasn't impressed with the soft earnings from Iljeong Industrial Co.,Ltd (KRX:008500) recently. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Iljeong IndustrialLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩174m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Iljeong IndustrialLtd.

Our Take On Iljeong IndustrialLtd's Profit Performance

Arguably, Iljeong IndustrialLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Iljeong IndustrialLtd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that Iljeong IndustrialLtd is showing 3 warning signs in our investment analysis and 2 of those are a bit unpleasant...

Today we've zoomed in on a single data point to better understand the nature of Iljeong IndustrialLtd'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 with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.