Duksan Hi MetalLtd (KOSDAQ:077360) Is Growing Earnings But Are They A Good Guide?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. 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 Duksan Hi MetalLtd's (KOSDAQ:077360) statutory profits are a good guide to its underlying earnings.

While Duksan Hi MetalLtd was able to generate revenue of ₩53.2b in the last twelve months, we think its profit result of ₩16.2b was more important. Happily, it has grown both its profit and revenue over the last three years, as you can see in the chart below.

Check out our latest analysis for Duksan Hi MetalLtd

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted Duksan Hi MetalLtd'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 Duksan Hi MetalLtd.

How Do Unusual Items Influence Profit?

To properly understand Duksan Hi MetalLtd's profit results, we need to consider the ₩9.4b gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Duksan Hi MetalLtd's positive unusual items were quite significant relative to its profit in the year to September 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On Duksan Hi MetalLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Duksan Hi MetalLtd'searnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Duksan Hi MetalLtd's underlying earnings power is lower than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 2 warning signs for Duksan Hi MetalLtd and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Duksan Hi MetalLtd'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. 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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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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