Should You Use Savezone I&C's (KRX:067830) Statutory Earnings To Analyse It?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. 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 Savezone I&C (KRX:067830).

We like the fact that Savezone I&C made a profit of ₩12.3b on its revenue of ₩141.7b, in the last year. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

See our latest analysis for Savezone I&C

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 Savezone I&C'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 Savezone I&C.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Savezone I&C's profit was reduced by ₩2.9b, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Savezone I&C to produce a higher profit next year, all else being equal.

Our Take On Savezone I&C's Profit Performance

Unusual items (expenses) detracted from Savezone I&C's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Savezone I&C's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Savezone I&C at this point in time. For example, Savezone I&C has 4 warning signs (and 1 which is a bit concerning) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Savezone I&C'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.

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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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