Kolmar HoldingsLtd's (KRX:024720) Solid Profits Have Weak Fundamentals

Kolmar Holdings Co.,Ltd.'s (KRX:024720) 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.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Kolmar HoldingsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩16b worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that Kolmar HoldingsLtd's positive unusual items were quite significant relative to its profit in the year to December 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On Kolmar HoldingsLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Kolmar HoldingsLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Kolmar HoldingsLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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. To help with this, we've discovered 4 warning signs (2 can't be ignored!) that you ought to be aware of before buying any shares in Kolmar HoldingsLtd.

This note has only looked at a single factor that sheds light on the nature of Kolmar HoldingsLtd'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.