SajodongaoneLtd (KRX:008040) Is Growing Earnings But Are They A Good Guide?

Broadly speaking, profitable businesses are less risky than unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether SajodongaoneLtd's (KRX:008040) statutory profits are a good guide to its underlying earnings.

While SajodongaoneLtd was able to generate revenue of ₩394.8b in the last twelve months, we think its profit result of ₩7.52b was more important. In the chart below, you can see that its profit and revenue have both grown over the last three years, although its revenue has slipped in the last twelve months.

See our latest analysis for SajodongaoneLtd

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted SajodongaoneLtd's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of SajodongaoneLtd.

The Impact Of Unusual Items On Profit

For anyone who wants to understand SajodongaoneLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩1.6b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect SajodongaoneLtd to produce a higher profit next year, all else being equal.

Our Take On SajodongaoneLtd's Profit Performance

Because unusual items detracted from SajodongaoneLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that SajodongaoneLtd's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 57% in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing SajodongaoneLtd at this point in time. Every company has risks, and we've spotted 1 warning sign for SajodongaoneLtd you should know about.

This note has only looked at a single factor that sheds light on the nature of SajodongaoneLtd's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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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