Should You Use Union Community's (KOSDAQ:203450) Statutory Earnings To Analyse It?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. 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 Union Community's (KOSDAQ:203450) statutory profits are a good guide to its underlying earnings.

While Union Community was able to generate revenue of ₩42.2b in the last twelve months, we think its profit result of ₩2.48b was more important. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

See our latest analysis for Union Community

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 discuss how unusual items have impacted Union Community's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Union Community.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Union Community's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩416m 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 Union Community 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 Union Community's Profit Performance

Arguably, Union Community's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Union Community's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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 want to do dive deeper into Union Community, you'd also look into what risks it is currently facing. For example, we've discovered 5 warning signs that you should run your eye over to get a better picture of Union Community.

Today we've zoomed in on a single data point to better understand the nature of Union Community's 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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