Yi Jinn Industrial's (TWSE:1457) Earnings Are Weaker Than They Seem

Yi Jinn Industrial Co., Ltd.'s (TWSE:1457) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for Yi Jinn Industrial

How Do Unusual Items Influence Profit?

For anyone who wants to understand Yi Jinn Industrial's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$1.7b worth of unusual items. 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. And that's as you'd expect, given these boosts are described as 'unusual'. Yi Jinn Industrial had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Yi Jinn Industrial.

Our Take On Yi Jinn Industrial's Profit Performance

As we discussed above, we think the significant positive unusual item makes Yi Jinn Industrial's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Yi Jinn Industrial's underlying earnings power is lower than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. To that end, you should learn about the 3 warning signs we've spotted with Yi Jinn Industrial (including 1 which is a bit unpleasant).

Today we've zoomed in on a single data point to better understand the nature of Yi Jinn Industrial's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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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.