SAMT (KOSDAQ:031330) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Investors were disappointed with SAMT Co., Ltd.'s (KOSDAQ:031330) earnings, despite the strong profit numbers. We did some digging and found some worrying underlying problems.

Check out our latest analysis for SAMT

An Unusual Tax Situation

We can see that SAMT received a tax benefit of ₩6.7b. It's always a bit noteworthy when a company is paid by the tax man, rather than paying the tax man. 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.

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

Our Take On SAMT's Profit Performance

As we have already discussed SAMT reported that it received a tax benefit, rather than paying tax, in the last year. Given that sort of benefit is not recurring, a focus on the statutory profit might make the company seem better than it really is. Because of this, we think that it may be that SAMT's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 6.0% over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing SAMT at this point in time. In terms of investment risks, we've identified 1 warning sign with SAMT, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of SAMT'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 with high insider ownership.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.