Investors Shouldn't Be Too Comfortable With Shin Hwa DynamicsLtd's (KRX:001770) Earnings

Shin Hwa Dynamics Co.,Ltd.'s (KRX:001770) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

We've discovered 2 warning signs about Shin Hwa DynamicsLtd. View them for free.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shin Hwa DynamicsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩5.1b 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. 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 that's as you'd expect, given these boosts are described as 'unusual'. We can see that Shin Hwa DynamicsLtd's positive unusual items were quite significant relative to its profit in the year to March 2025. 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 Shin Hwa DynamicsLtd.

Our Take On Shin Hwa DynamicsLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shin Hwa DynamicsLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shin Hwa DynamicsLtd's underlying earnings power is lower than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 2 warning signs for Shin Hwa DynamicsLtd and you'll want to know about them.

Today we've zoomed in on a single data point to better understand the nature of Shin Hwa DynamicsLtd'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. 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.