We Wouldn't Rely On Kook Soon Dang.Co.Ltd's (KOSDAQ:043650) Statutory Earnings As A Guide

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. 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. Today we'll focus on whether this year's statutory profits are a good guide to understanding Kook Soon Dang.Co.Ltd (KOSDAQ:043650).

While Kook Soon Dang.Co.Ltd was able to generate revenue of ₩100.0b in the last twelve months, we think its profit result of ₩5.57b was more important.

See our latest analysis for Kook Soon Dang.Co.Ltd

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 Kook Soon Dang.Co.Ltd's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Kook Soon Dang.Co.Ltd.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Kook Soon Dang.Co.Ltd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩8.5b 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. 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 that's as you'd expect, given these boosts are described as 'unusual'. Kook Soon Dang.Co.Ltd had a rather significant contribution from unusual items relative to its profit to September 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Kook Soon Dang.Co.Ltd's Profit Performance

As previously mentioned, Kook Soon Dang.Co.Ltd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Kook Soon Dang.Co.Ltd'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. If you'd like to know more about Kook Soon Dang.Co.Ltd as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Kook Soon Dang.Co.Ltd you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Kook Soon Dang.Co.Ltd'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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