JW Shinyak's (KOSDAQ:067290) Profits Appear To Have Quality Issues

JW Shinyak Corporation's (KOSDAQ:067290) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

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An Unusual Tax Situation

We can see that JW Shinyak received a tax benefit of ₩1.7b. This is meaningful because companies usually pay tax rather than receive tax benefits. The receipt of a tax benefit is obviously a good thing, on its own. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal. While we think it's good that the company has booked a tax benefit, it does mean that there's every chance the statutory profit will come in a lot higher than it would be if the income was adjusted for one-off factors.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of JW Shinyak.

Our Take On JW Shinyak's Profit Performance

As we have already discussed JW Shinyak reported that it received a tax benefit, rather than paying tax, in the last year. Given that sort of benefit is not recurring, a focus on the statutory profit might make the company seem better than it really is. Because of this, we think that it may be that JW Shinyak's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 29% EPS growth 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 JW Shinyak 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 JW Shinyak you should be aware of.

This note has only looked at a single factor that sheds light on the nature of JW Shinyak'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 with significant insider holdings to be useful.

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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.