Dongbang Transport Logistics' (KRX:004140) Strong Earnings Are Of Good Quality

When companies post strong earnings, the stock generally performs well, just like Dongbang Transport Logistics Co., Ltd.'s (KRX:004140) stock has recently. We have done some analysis, and we found several positive factors beyond the profit numbers.

View our latest analysis for Dongbang Transport Logistics

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Dongbang Transport Logistics' profit was reduced by ₩5.3b, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Dongbang Transport Logistics to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Dongbang Transport Logistics.

Our Take On Dongbang Transport Logistics' Profit Performance

Because unusual items detracted from Dongbang Transport Logistics' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Dongbang Transport Logistics' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive 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. For example, Dongbang Transport Logistics has 2 warning signs (and 1 which can't be ignored) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Dongbang Transport Logistics' 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.

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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.