Investors Shouldn't Be Too Comfortable With Iljin DiamondLtd's (KRX:081000) Earnings

Last week's profit announcement from Iljin Diamond Co.,Ltd (KRX:081000) was underwhelming for investors, despite headline numbers being robust. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Iljin DiamondLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₩2.0b worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On Iljin DiamondLtd's Profit Performance

Arguably, Iljin DiamondLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Iljin DiamondLtd's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 22% in the last year. 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. If you want to do dive deeper into Iljin DiamondLtd, you'd also look into what risks it is currently facing. For example - Iljin DiamondLtd has 3 warning signs we think you should be aware of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.