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. In this article, we'll look at how useful this year's statutory profit is, when analysing Seoul Semiconductor (KOSDAQ:046890).

It's good to see that over the last twelve months Seoul Semiconductor made a profit of ₩24.8b on revenue of ₩1.09t. As you can see in the chart below, its profit has declined over the last three years, even though its revenue has increased.

View our latest analysis for Seoul Semiconductor

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 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 ₩8.4b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. 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

Unusual items (expenses) detracted from Seoul Semiconductor's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Seoul Semiconductor's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Seoul Semiconductor.

Today we've zoomed in on a single data point to better understand the nature of Seoul Semiconductor'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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