Should You Use JCH Systems's (KOSDAQ:033320) Statutory Earnings To Analyse It?

As a general rule, we think profitable companies are less risky than companies that lose money. 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 JCH Systems' (KOSDAQ:033320) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months JCH Systems made a profit of ₩6.51b on revenue of ₩224.7b.

See our latest analysis for JCH Systems

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 focus on the impact unusual items have had on JCH Systems' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of JCH Systems.

How Do Unusual Items Influence Profit?

For anyone who wants to understand JCH Systems' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩1.4b worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If JCH Systems doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On JCH Systems' Profit Performance

Arguably, JCH Systems' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that JCH Systems' statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. If you're interested we have a graphic representation of JCH Systems' balance sheet.

Today we've zoomed in on a single data point to better understand the nature of JCH Systems' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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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