Why Korea Information Engineering Services' (KOSDAQ:039740) Shaky Earnings Are Just The Beginning Of Its Problems

A lackluster earnings announcement from Korea Information Engineering Services Co., Ltd. (KOSDAQ:039740) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Korea Information Engineering Services

The Impact Of Unusual Items On Profit

For anyone who wants to understand Korea Information Engineering Services' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩3.1b 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. 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 that's as you'd expect, given these boosts are described as 'unusual'. We can see that Korea Information Engineering Services' positive unusual items were quite significant relative to its profit in the year to December 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Korea Information Engineering Services.

Our Take On Korea Information Engineering Services' Profit Performance

As we discussed above, we think the significant positive unusual item makes Korea Information Engineering Services' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Korea Information Engineering Services' underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 3 warning signs for Korea Information Engineering Services and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Korea Information Engineering Services' profit. 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. 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.

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.