Why SGC EnergyLtd's (KRX:005090) Earnings Are Better Than They Seem

The market seemed underwhelmed by last week's earnings announcement from SGC Energy Co.,Ltd. (KRX:005090) despite the healthy numbers. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

See our latest analysis for SGC EnergyLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand SGC EnergyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩22b due to unusual items. 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, after all, that's exactly what the accounting terminology implies. If SGC EnergyLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On SGC EnergyLtd's Profit Performance

Unusual items (expenses) detracted from SGC EnergyLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think SGC EnergyLtd's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 5.7% per year over the last three years. 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. If you want to do dive deeper into SGC EnergyLtd, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for SGC EnergyLtd (2 can't be ignored!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of SGC EnergyLtd'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 with high insider ownership.

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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.