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

Hua Eng Wire & Cable Co., Ltd.'s (TWSE:1608) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Hua Eng Wire & Cable

The Impact Of Unusual Items On Profit

To properly understand Hua Eng Wire & Cable's profit results, we need to consider the NT$145m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Hua Eng Wire & Cable 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 Hua Eng Wire & Cable.

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

We'd posit that Hua Eng Wire & Cable's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Hua Eng Wire & Cable's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 7.1% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with Hua Eng Wire & Cable, and understanding this 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 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.