Weak Statutory Earnings May Not Tell The Whole Story For SeAH Holdings (KRX:058650)

The subdued market reaction suggests that SeAH Holdings Corporation's (KRX:058650) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand SeAH Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩13b 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. And, after all, that's exactly what the accounting terminology implies. If SeAH Holdings 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 SeAH Holdings.

Our Take On SeAH Holdings' Profit Performance

Arguably, SeAH Holdings' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that SeAH Holdings' statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the 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. If you want to do dive deeper into SeAH Holdings, you'd also look into what risks it is currently facing. Be aware that SeAH Holdings is showing 4 warning signs in our investment analysis and 1 of those is potentially serious...

This note has only looked at a single factor that sheds light on the nature of SeAH Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.