We Like DYNAM JAPAN HOLDINGS' (HKG:6889) Earnings For More Than Just Statutory Profit

Shareholders appeared to be happy with DYNAM JAPAN HOLDINGS Co., Ltd.'s (HKG:6889) solid earnings report last week. This reaction by the market reaction is understandable when looking at headline profits and we have found some further encouraging factors.

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How Do Unusual Items Influence Profit?

To properly understand DYNAM JAPAN HOLDINGS' profit results, we need to consider the JP¥1.6b expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. 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 DYNAM JAPAN HOLDINGS 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 DYNAM JAPAN HOLDINGS.

Our Take On DYNAM JAPAN HOLDINGS' Profit Performance

Unusual items (expenses) detracted from DYNAM JAPAN HOLDINGS' earnings over the last year, but we might see an improvement next year. Because of this, we think DYNAM JAPAN HOLDINGS' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 2 warning signs for DYNAM JAPAN HOLDINGS (1 is a bit concerning) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of DYNAM JAPAN HOLDINGS' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.