Ace Bed's (KOSDAQ:003800) Earnings Are Weaker Than They Seem

Despite posting some strong earnings, the market for Ace Bed Company Limited's (KOSDAQ:003800) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

We check all companies for important risks. See what we found for Ace Bed in our free report.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Ace Bed's profit received a boost of ₩8.2b 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. Which is hardly surprising, given the name. 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 Ace Bed.

Our Take On Ace Bed's Profit Performance

Arguably, Ace Bed's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Ace Bed's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 11% in 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. We've done some analysis and you can see our take on Ace Bed's balance sheet by clicking here.

This note has only looked at a single factor that sheds light on the nature of Ace Bed'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. 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 with significant insider holdings to be useful.

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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.