SamchullyLtd (KRX:004690) Strong Profits May Be Masking Some Underlying Issues

The recent earnings posted by Samchully Co.,Ltd (KRX:004690) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

View our latest analysis for SamchullyLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand SamchullyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩29b 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'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On SamchullyLtd's Profit Performance

Arguably, SamchullyLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that SamchullyLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 52% per annum growth in EPS for the last three. 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. So while earnings quality is important, it's equally important to consider the risks facing SamchullyLtd at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of SamchullyLtd.

Today we've zoomed in on a single data point to better understand the nature of SamchullyLtd'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.