Hua Eng Wire & Cable's (TWSE:1608) Profits May Not Reveal Underlying Issues

Hua Eng Wire & Cable Co., Ltd.'s (TWSE:1608) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

Check out our latest analysis for Hua Eng Wire & Cable

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hua Eng Wire & Cable's profit received a boost of NT$393m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. We can see that Hua Eng Wire & Cable's positive unusual items were quite significant relative to its profit in the year to December 2023. 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 Hua Eng Wire & Cable.

Our Take On Hua Eng Wire & Cable's Profit Performance

As we discussed above, we think the significant positive unusual item makes Hua Eng Wire & Cable's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Hua Eng Wire & Cable's underlying earnings power is lower than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 2 warning signs with Hua Eng Wire & Cable, and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Hua Eng Wire & Cable'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. 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. 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.