There May Be Underlying Issues With The Quality Of Dong-A Hwa SungLtd's (KOSDAQ:041930) Earnings

Despite posting some strong earnings, the market for Dong-A Hwa Sung Co.,Ltd.'s (KOSDAQ:041930) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Dong-A Hwa SungLtd's profit received a boost of ₩5.1b in unusual items, over the last year. 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. Which is hardly surprising, given the name. If Dong-A Hwa SungLtd 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 Dong-A Hwa SungLtd.

Our Take On Dong-A Hwa SungLtd's Profit Performance

We'd posit that Dong-A Hwa SungLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Dong-A Hwa SungLtd's statutory profits are better than its underlying earnings power. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Dong-A Hwa SungLtd as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Dong-A Hwa SungLtd you should know about.

This note has only looked at a single factor that sheds light on the nature of Dong-A Hwa SungLtd'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.