There May Be Reason For Hope In Synergy Innovation's (KOSDAQ:048870) Disappointing Earnings

Shareholders appeared unconcerned with Synergy Innovation Co., Ltd.'s (KOSDAQ:048870) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Synergy Innovation expanded the number of shares on issue by 6.5% over the last year. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out Synergy Innovation's historical EPS growth by clicking on this link.

How Is Dilution Impacting Synergy Innovation's Earnings Per Share (EPS)?

Synergy Innovation was losing money three years ago. And even focusing only on the last twelve months, we see profit is down 66%. Sadly, earnings per share fell further, down a full 67% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Synergy Innovation's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

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

How Do Unusual Items Influence Profit?

Alongside that dilution, it's also important to note that Synergy Innovation's profit suffered from unusual items, which reduced profit by ₩10b in the last twelve months. 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 that's hardly a surprise given these line items are considered unusual. Synergy Innovation took a rather significant hit from unusual items in the year to March 2025. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Our Take On Synergy Innovation's Profit Performance

Synergy Innovation suffered from unusual items which depressed its profit in its last report; if that is not repeated then profit should be higher, all else being equal. But unfortunately the dilution means that shareholders now own a smaller proportion of the company (assuming they maintained the same number of shares). That will weigh on earnings per share, even if it is not reflected in net income. Considering all the aforementioned, we'd venture that Synergy Innovation's profit result is a pretty good guide to its true profitability, albeit a bit on the conservative side. If you want to do dive deeper into Synergy Innovation, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 3 warning signs with Synergy Innovation, and understanding these bad boys should be part of your investment process.

In this article we've looked at a number of factors that can impair the utility of profit numbers, as a guide to a business. 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. 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 with significant insider holdings to be useful.

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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.