We Think Dongjin Semichem's (KOSDAQ:005290) Robust Earnings Are Conservative

Dongjin Semichem Co., Ltd.'s (KOSDAQ:005290) strong earnings report was rewarded with a positive stock price move. We have done some analysis, and we found several positive factors beyond the profit numbers.

See our latest analysis for Dongjin Semichem

The Impact Of Unusual Items On Profit

To properly understand Dongjin Semichem's profit results, we need to consider the ₩23b expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Dongjin Semichem 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 Dongjin Semichem.

Our Take On Dongjin Semichem's Profit Performance

Because unusual items detracted from Dongjin Semichem's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Dongjin Semichem's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 50% per year 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. If you're interested we have a graphic representation of Dongjin Semichem's balance sheet.

This note has only looked at a single factor that sheds light on the nature of Dongjin Semichem's profit. But there are plenty of other ways to inform your opinion of a company. 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.