Ajin Electronic ComponentsLtd's (KRX:009320) Earnings May Just Be The Starting Point

The subdued stock price reaction suggests that Ajin Electronic Components Co.,Ltd's (KRX:009320) strong earnings didn't offer any surprises. Our analysis suggests that investors might be missing some promising details.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Ajin Electronic ComponentsLtd's profit was reduced by ₩1.6b, due to unusual items, over the last year. 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 that's hardly a surprise given these line items are considered unusual. If Ajin Electronic ComponentsLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ajin Electronic ComponentsLtd.

Our Take On Ajin Electronic ComponentsLtd's Profit Performance

Unusual items (expenses) detracted from Ajin Electronic ComponentsLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Ajin Electronic ComponentsLtd's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Ajin Electronic ComponentsLtd has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Ajin Electronic ComponentsLtd'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.