The Strong Earnings Posted By SOOSAN INT (KOSDAQ:050960) Are A Good Indication Of The Strength Of The Business

SOOSAN INT Co., Ltd.'s (KOSDAQ:050960) strong earnings report was rewarded with a positive stock price move. We did some digging and found some further encouraging factors that investors will like.

View our latest analysis for SOOSAN INT

How Do Unusual Items Influence Profit?

To properly understand SOOSAN INT's profit results, we need to consider the ₩1.1b expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If SOOSAN INT doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of SOOSAN INT.

An Unusual Tax Situation

Just as we noted the unusual items, we must inform you that SOOSAN INT received a tax benefit which contributed ₩997m to the bottom line. This is of course a bit out of the ordinary, given it is more common for companies to be paying tax than receiving tax benefits! We're sure the company was pleased with its tax benefit. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal.

Our Take On SOOSAN INT's Profit Performance

In its last report SOOSAN INT received a tax benefit which might make its profit look better than it really is on a underlying level. But on the other hand, it also saw an unusual item depress its profit. Given the contrasting considerations, we don't have a strong view as to whether SOOSAN INT's profits are an apt reflection of its underlying potential for profit. So while earnings quality is important, it's equally important to consider the risks facing SOOSAN INT at this point in time. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of SOOSAN INT.

Our examination of SOOSAN INT has focussed on certain factors that can make its earnings look better than they are. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.