Solid Earnings May Not Tell The Whole Story For Ace Bed (KOSDAQ:003800)

The recent earnings posted by Ace Bed Company Limited (KOSDAQ:003800) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Ace Bed's profit received a boost of ₩6.8b in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. And, after all, that's exactly what the accounting terminology implies. If Ace Bed doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ace Bed.

Our Take On Ace Bed's Profit Performance

Arguably, Ace Bed's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Ace Bed's true underlying earnings power is actually less than its statutory profit. And we are pleased to note that EPS is at least heading in the right direction in the alst twelve months. 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. While earnings are important, another area to consider is the balance sheet. We've done some analysis and you can see our take on Ace Bed's balance sheet by clicking here.

Today we've zoomed in on a single data point to better understand the nature of Ace Bed'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.