Are Seoul Semiconductor's (KOSDAQ:046890) Statutory Earnings A Good Guide To Its Underlying Profitability?

As a general rule, we think profitable companies are less risky than companies that lose money. 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. This article will consider whether Seoul Semiconductor's (KOSDAQ:046890) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Seoul Semiconductor made a profit of ₩22.8b on revenue of ₩1.12t. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

See our latest analysis for Seoul Semiconductor

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted Seoul Semiconductor's most recent profit results. 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.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Seoul Semiconductor's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩8.3b due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Seoul Semiconductor 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 Seoul Semiconductor's Profit Performance

Because unusual items detracted from Seoul Semiconductor's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Seoul Semiconductor's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. 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 Seoul Semiconductor as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Seoul Semiconductor and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of Seoul Semiconductor'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 that insiders are buying to be useful.

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