Solid Earnings May Not Tell The Whole Story For PlumbFast (KOSDAQ:035200)

Following the solid earnings report from PlumbFast Co., Ltd. (KOSDAQ:035200), the market responded by bidding up the stock price. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

See our latest analysis for PlumbFast

How Do Unusual Items Influence Profit?

For anyone who wants to understand PlumbFast's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩169m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. 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 PlumbFast.

Our Take On PlumbFast's Profit Performance

We'd posit that PlumbFast'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 PlumbFast's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 36% in 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 while earnings quality is important, it's equally important to consider the risks facing PlumbFast at this point in time. While conducting our analysis, we found that PlumbFast has 2 warning signs and it would be unwise to ignore them.

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