Are DoubleUGames's (KRX:192080) Statutory Earnings A Good Reflection Of Its Earnings Potential?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing DoubleUGames (KRX:192080).

It's good to see that over the last twelve months DoubleUGames made a profit of ₩106.7b on revenue of ₩627.5b. In the chart below, you can see that its profit and revenue have both grown over the last three years.

Check out our latest analysis for DoubleUGames

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will discuss how unusual items have impacted DoubleUGames' 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.

The Impact Of Unusual Items On Profit

For anyone who wants to understand DoubleUGames' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩21b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect DoubleUGames to produce a higher profit next year, all else being equal.

Our Take On DoubleUGames' Profit Performance

Unusual items (expenses) detracted from DoubleUGames' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that DoubleUGames' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. 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. In terms of investment risks, we've identified 1 warning sign with DoubleUGames, and understanding this should be part of your investment process.

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