Heung-A ShippingLtd (KRX:003280) Strong Profits May Be Masking Some Underlying Issues

The stock price didn't jump after Heung-A Shipping Co.,Ltd. (KRX:003280) posted decent earnings last week. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

View our latest analysis for Heung-A ShippingLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Heung-A ShippingLtd's profit received a boost of ₩12b in unusual items, over the last year. 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. Heung-A ShippingLtd had a rather significant contribution from unusual items relative to its profit to December 2023. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Heung-A ShippingLtd.

Our Take On Heung-A ShippingLtd's Profit Performance

As previously mentioned, Heung-A ShippingLtd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Heung-A ShippingLtd's underlying earnings power is lower than its statutory profit. The good news is that, its earnings per share increased by 51% 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Heung-A ShippingLtd (including 1 which is significant).

Today we've zoomed in on a single data point to better understand the nature of Heung-A ShippingLtd'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 that insiders are buying.

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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.