Should You Use POINT ENGINEERINGLtd's (KOSDAQ:256630) Statutory Earnings To Analyse It?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. 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 POINT ENGINEERINGLtd (KOSDAQ:256630).

While POINT ENGINEERINGLtd was able to generate revenue of ₩52.8b in the last twelve months, we think its profit result of ₩6.53b was more important.

View our latest analysis for POINT ENGINEERINGLtd

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on POINT ENGINEERINGLtd's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of POINT ENGINEERINGLtd.

The Impact Of Unusual Items On Profit

For anyone who wants to understand POINT ENGINEERINGLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩679m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Our Take On POINT ENGINEERINGLtd's Profit Performance

We'd posit that POINT ENGINEERINGLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that POINT ENGINEERINGLtd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 48% EPS growth in the last year. 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. If you want to do dive deeper into POINT ENGINEERINGLtd, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for POINT ENGINEERINGLtd and you'll want to know about this.

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