New Toyo International Holdings' (SGX:N08) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Despite New Toyo International Holdings Ltd's (SGX:N08) recent earnings report having lackluster headline numbers, the market responded positively. We think that shareholders might be missing some concerning factors that our analysis found.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand New Toyo International Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from S$2.3m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If New Toyo International Holdings doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of New Toyo International Holdings.

Our Take On New Toyo International Holdings' Profit Performance

Arguably, New Toyo International Holdings' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that New Toyo International Holdings' true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 15% per annum growth in EPS for the last three. 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 while earnings quality is important, it's equally important to consider the risks facing New Toyo International Holdings at this point in time. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of New Toyo International Holdings.

Today we've zoomed in on a single data point to better understand the nature of New Toyo International Holdings' 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 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.