Here's Why Dongil Technology's (KOSDAQ:032960) Statutory Earnings Are Arguably Too Conservative

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 Dongil Technology's (KOSDAQ:032960) statutory profits are a good guide to its underlying earnings.

We like the fact that Dongil Technology made a profit of ₩1.39b on its revenue of ₩25.0b, in the last year. Below, you can see that both its revenue and its profit have fallen over the last three years.

See our latest analysis for Dongil Technology

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Dongil Technology's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Dongil Technology.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Dongil Technology's profit was reduced by ₩687m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. Dongil Technology took a rather significant hit from unusual items in the year to September 2020. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Our Take On Dongil Technology's Profit Performance

As we discussed above, we think the significant unusual expense will make Dongil Technology's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Dongil Technology's statutory profit actually understates its earnings potential! And the EPS is up 5.6% over 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 Dongil Technology as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Dongil Technology (1 is potentially serious) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Dongil Technology'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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