DH AUTOLEADLtd's (KOSDAQ:290120) Solid Profits Have Weak Fundamentals

Despite posting some strong earnings, the market for DH AUTOLEAD Co.,Ltd.'s (KOSDAQ:290120) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand DH AUTOLEADLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩1.2b worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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, after all, that's exactly what the accounting terminology implies. 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 DH AUTOLEADLtd.

Our Take On DH AUTOLEADLtd's Profit Performance

Arguably, DH AUTOLEADLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that DH AUTOLEADLtd's statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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'd like to know more about DH AUTOLEADLtd as a business, it's important to be aware of any risks it's facing. For example, DH AUTOLEADLtd has 4 warning signs (and 2 which are concerning) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of DH AUTOLEADLtd'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.