Dong Ah Tire & RubberLtd's (KRX:282690) Conservative Accounting Might Explain Soft Earnings

Soft earnings didn't appear to concern Dong Ah Tire & Rubber Co.,Ltd's (KRX:282690) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Dong Ah Tire & RubberLtd

How Do Unusual Items Influence Profit?

To properly understand Dong Ah Tire & RubberLtd's profit results, we need to consider the ₩2.1b expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Dong Ah Tire & RubberLtd 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 Ah Tire & RubberLtd.

Our Take On Dong Ah Tire & RubberLtd's Profit Performance

Because unusual items detracted from Dong Ah Tire & RubberLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Dong Ah Tire & RubberLtd's earnings potential is at least as good as it seems, and maybe even better! 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 3 warning signs for Dong Ah Tire & RubberLtd (1 can't be ignored!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of Dong Ah Tire & RubberLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying 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.