There May Be Reason For Hope In Dong Yang Piston's (KRX:092780) Disappointing Earnings

Shareholders appeared unconcerned with Dong Yang Piston Co., Ltd.'s (KRX:092780) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Dong Yang Piston

How Do Unusual Items Influence Profit?

For anyone who wants to understand Dong Yang Piston's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₩4.8b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Dong Yang Piston 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 Dong Yang Piston.

Our Take On Dong Yang Piston's Profit Performance

Because unusual items detracted from Dong Yang Piston's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Dong Yang Piston's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've found that Dong Yang Piston has 5 warning signs (1 is a bit unpleasant!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Dong Yang Piston'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. 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 with significant insider holdings to be useful.

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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.