DAEYANG ELECTRIC.Co.Ltd's (KOSDAQ:108380) Earnings Are Of Questionable Quality

DAEYANG ELECTRIC.Co.,Ltd.'s (KOSDAQ:108380) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for DAEYANG ELECTRIC.Co.Ltd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that DAEYANG ELECTRIC.Co.Ltd's profit received a boost of ₩1.5b in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. 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 DAEYANG ELECTRIC.Co.Ltd.

Our Take On DAEYANG ELECTRIC.Co.Ltd's Profit Performance

We'd posit that DAEYANG ELECTRIC.Co.Ltd'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 DAEYANG ELECTRIC.Co.Ltd's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 18% over the last three years. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, DAEYANG ELECTRIC.Co.Ltd has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of DAEYANG ELECTRIC.Co.Ltd'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. 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. 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.
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