Chyang Sheng Dyeing & Finishing (TWSE:1463) Strong Profits May Be Masking Some Underlying Issues

Chyang Sheng Dyeing & Finishing Co., Ltd.'s (TWSE:1463) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

See our latest analysis for Chyang Sheng Dyeing & Finishing

The Impact Of Unusual Items On Profit

For anyone who wants to understand Chyang Sheng Dyeing & Finishing's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$59m 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. 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'. Chyang Sheng Dyeing & Finishing 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 Chyang Sheng Dyeing & Finishing.

Our Take On Chyang Sheng Dyeing & Finishing's Profit Performance

As we discussed above, we think the significant positive unusual item makes Chyang Sheng Dyeing & Finishing's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Chyang Sheng Dyeing & Finishing'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. If you'd like to know more about Chyang Sheng Dyeing & Finishing as a business, it's important to be aware of any risks it's facing. Our analysis shows 4 warning signs for Chyang Sheng Dyeing & Finishing (1 is concerning!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Chyang Sheng Dyeing & Finishing'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 that insiders are buying.

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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.