Right Way IndustrialLtd's (TWSE:1506) Anemic Earnings Might Be Worse Than You Think

A lackluster earnings announcement from Right Way Industrial Co.,Ltd (TWSE:1506) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Right Way IndustrialLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Right Way IndustrialLtd's profit received a boost of NT$15m 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. If Right Way IndustrialLtd 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 Right Way IndustrialLtd.

Our Take On Right Way IndustrialLtd's Profit Performance

Arguably, Right Way IndustrialLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Right Way IndustrialLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. We've done some analysis and you can see our take on Right Way IndustrialLtd's balance sheet by clicking here.

This note has only looked at a single factor that sheds light on the nature of Right Way IndustrialLtd's 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.