Chinyang Holdings (KRX:100250) Is Growing Earnings But Are They A Good Guide?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Chinyang Holdings' (KRX:100250) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Chinyang Holdings made a profit of ₩32.1b on revenue of ₩214.7b. As depicted below, while its revenue may have fallen over the last few years, its profit actually improved.

Check out our latest analysis for Chinyang Holdings

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on Chinyang Holdings' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Chinyang Holdings.

The Impact Of Unusual Items On Profit

To properly understand Chinyang Holdings' profit results, we need to consider the ₩30b gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Chinyang Holdings had a rather significant contribution from unusual items relative to its profit to September 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Chinyang Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes Chinyang Holdings'earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Chinyang Holdings' underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that Chinyang Holdings has 2 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of Chinyang Holdings' 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. 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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