Should You Use Samhyun Steel's (KOSDAQ:017480) Statutory Earnings To Analyse It?

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. This article will consider whether Samhyun Steel's (KOSDAQ:017480) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Samhyun Steel made a profit of ₩6.29b on revenue of ₩224.0b. As you can see in the chart below, its profit has declined over the last three years, even though its revenue has increased.

See our latest analysis for Samhyun Steel

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 focus on the impact unusual items have had on Samhyun Steel's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Samhyun Steel.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Samhyun Steel's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩1.1b worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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, after all, that's exactly what the accounting terminology implies. If Samhyun Steel doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On Samhyun Steel's Profit Performance

We'd posit that Samhyun Steel's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Samhyun Steel's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 21% EPS growth 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. If you want to do dive deeper into Samhyun Steel, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Samhyun Steel and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of Samhyun Steel'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. 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 that insiders are buying to be useful.

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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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