Are Daejung Chemicals & MetalsLtd's (KOSDAQ:120240) Statutory Earnings A Good Guide To Its Underlying Profitability?

Broadly speaking, profitable businesses are less risky than unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding Daejung Chemicals & MetalsLtd (KOSDAQ:120240).

While Daejung Chemicals & MetalsLtd was able to generate revenue of ₩78.7b in the last twelve months, we think its profit result of ₩5.93b was more important. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

Check out our latest analysis for Daejung Chemicals & MetalsLtd

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 discuss how unusual items have impacted Daejung Chemicals & MetalsLtd'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 Daejung Chemicals & MetalsLtd.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Daejung Chemicals & MetalsLtd's profit was reduced by ₩3.0b, due to unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. If Daejung Chemicals & MetalsLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Daejung Chemicals & MetalsLtd's Profit Performance

Unusual items (expenses) detracted from Daejung Chemicals & MetalsLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Daejung Chemicals & MetalsLtd's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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'd like to know more about Daejung Chemicals & MetalsLtd as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Daejung Chemicals & MetalsLtd you should know about.

Today we've zoomed in on a single data point to better understand the nature of Daejung Chemicals & MetalsLtd'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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