Gordon Auto Body Parts' (TPE:1524) Anemic Earnings Might Be Worse Than You Think

Gordon Auto Body Parts Co., Ltd.'s (TPE:1524) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Gordon Auto Body Parts

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Gordon Auto Body Parts' profit received a boost of NT$22m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Gordon Auto Body Parts had a rather significant contribution from unusual items relative to its profit to December 2020. 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 Gordon Auto Body Parts.

Our Take On Gordon Auto Body Parts' Profit Performance

As previously mentioned, Gordon Auto Body Parts' 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 Gordon Auto Body Parts' underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Gordon Auto Body Parts at this point in time. To help with this, we've discovered 5 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in Gordon Auto Body Parts.

This note has only looked at a single factor that sheds light on the nature of Gordon Auto Body Parts' profit. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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