I-Sheng Electric Wire & Cable's (TWSE:6115) Promising Earnings May Rest On Soft Foundations

I-Sheng Electric Wire & Cable Co., Ltd. (TWSE:6115) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that I-Sheng Electric Wire & Cable's profit received a boost of NT$75m 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On I-Sheng Electric Wire & Cable's Profit Performance

Arguably, I-Sheng Electric Wire & Cable's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that I-Sheng Electric Wire & Cable's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 34% per annum growth in EPS for the last three. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of I-Sheng Electric Wire & Cable.

This note has only looked at a single factor that sheds light on the nature of I-Sheng Electric 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. 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.

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.