Does Sam-A Aluminium Company's (KRX:006110) Statutory Profit Adequately Reflect Its Underlying Profit?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. 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 Sam-A Aluminium Company's (KRX:006110) statutory profits are a good guide to its underlying earnings.

While Sam-A Aluminium Company was able to generate revenue of ₩188.5b in the last twelve months, we think its profit result of ₩4.58b was more important.

Check out our latest analysis for Sam-A Aluminium Company

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

The Impact Of Unusual Items On Profit

To properly understand Sam-A Aluminium Company's profit results, we need to consider the ₩1.1b gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 Sam-A Aluminium Company 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 Sam-A Aluminium Company's Profit Performance

We'd posit that Sam-A Aluminium Company's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Sam-A Aluminium Company's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 6.5% 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. If you'd like to know more about Sam-A Aluminium Company as a business, it's important to be aware of any risks it's facing. For instance, we've identified 5 warning signs for Sam-A Aluminium Company (2 shouldn't be ignored) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Sam-A Aluminium Company'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. 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.

When trading Sam-A Aluminium Company or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.