It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. 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. Today we’ll focus on whether this year’s statutory profits are a good guide to understanding Yura Tech (KOSDAQ:048430).
We like the fact that Yura Tech made a profit of ₩2.31b on its revenue of ₩203.5b, in the last year. The chart below shows that both revenue and profit have declined over the last three years.
Importantly, statutory profits are not always the best tool for understanding a company’s true earnings power, so it’s well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on Yura Tech’s statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Yura Tech.
The Impact Of Unusual Items On Profit
For anyone who wants to understand Yura Tech’s profit beyond the statutory numbers, it’s important to note that during the last twelve months statutory profit gained from ₩1.8b worth of unusual items. While it’s always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that’s as you’d expect, given these boosts are described as ‘unusual’. Yura Tech had a rather significant contribution from unusual items relative to its profit to December 2019. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.
Our Take On Yura Tech’s Profit Performance
As we discussed above, we think the significant positive unusual item makes Yura Tech’s earnings a poor guide to its underlying profitability. For this reason, we think that Yura Tech’s statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. 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. So while earnings quality is important, it’s equally important to consider the risks facing Yura Tech at this point in time. Case in point: We’ve spotted 5 warning signs for Yura Tech you should be mindful of and 1 of them doesn’t sit too well with us.
Today we’ve zoomed in on a single data point to better understand the nature of Yura Tech’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 that insiders are buying to be useful.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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