Are HyosungONBCo.Ltd's (KOSDAQ:097870) Statutory Earnings A Good Guide To Its Underlying Profitability?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. 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 HyosungONBCo.Ltd (KOSDAQ:097870).

While HyosungONBCo.Ltd was able to generate revenue of ₩29.5b in the last twelve months, we think its profit result of ₩1.95b was more important. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

View our latest analysis for HyosungONBCo.Ltd

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 HyosungONBCo.Ltd'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 HyosungONBCo.Ltd.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that HyosungONBCo.Ltd's profit received a boost of ₩164m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. If HyosungONBCo.Ltd 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 HyosungONBCo.Ltd's Profit Performance

We'd posit that HyosungONBCo.Ltd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that HyosungONBCo.Ltd's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 13% 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 2 warning signs for HyosungONBCo.Ltd (1 shouldn't be ignored!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of HyosungONBCo.Ltd's 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. 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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