Earnings Troubles May Signal Larger Issues for Chia Her Industrial (TWSE:1449) Shareholders

A lackluster earnings announcement from Chia Her Industrial Co., Ltd. (TWSE:1449) 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 Chia Her Industrial

How Do Unusual Items Influence Profit?

For anyone who wants to understand Chia Her Industrial's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$122m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. Chia Her Industrial had a rather significant contribution from unusual items relative to its profit 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 Chia Her Industrial.

Our Take On Chia Her Industrial's Profit Performance

As we discussed above, we think the significant positive unusual item makes Chia Her Industrial's earnings a poor guide to its underlying profitability. For this reason, we think that Chia Her Industrial's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. 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. If you'd like to know more about Chia Her Industrial as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 6 warning signs we've spotted with Chia Her Industrial (including 1 which makes us a bit uncomfortable).

This note has only looked at a single factor that sheds light on the nature of Chia Her Industrial'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.