Concerns Surrounding Daesung Energy's (KRX:117580) Performance

Daesung Energy Co., Ltd.'s (KRX:117580) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

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How Do Unusual Items Influence Profit?

To properly understand Daesung Energy's profit results, we need to consider the ₩1.5b gain attributed to 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. Which is hardly surprising, given the name. If Daesung Energy doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Daesung Energy's Profit Performance

We'd posit that Daesung Energy's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Daesung Energy's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 16% 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'd like to know more about Daesung Energy as a business, it's important to be aware of any risks it's facing. For example - Daesung Energy has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Daesung Energy's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.