Weak Statutory Earnings May Not Tell The Whole Story For SeAH Steel (KRX:306200)

A lackluster earnings announcement from SeAH Steel Corporation (KRX:306200) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for SeAH Steel

The Impact Of Unusual Items On Profit

Importantly, our data indicates that SeAH Steel's profit received a boost of ₩13b in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. Which is hardly surprising, given the name. If SeAH Steel doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On SeAH Steel's Profit Performance

We'd posit that SeAH Steel'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 SeAH Steel's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 68% over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about SeAH Steel as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for SeAH Steel you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of SeAH Steel'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 with high insider ownership.

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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.