Earnings Troubles May Signal Larger Issues for Yi Shin Textile Industrial (TWSE:4440) Shareholders

A lackluster earnings announcement from Yi Shin Textile Industrial Co., Ltd. (TWSE:4440) 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 Yi Shin Textile Industrial

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Yi Shin Textile Industrial's profit received a boost of NT$20m in unusual items, over the last year. 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'. We can see that Yi Shin Textile Industrial's positive unusual items were quite significant relative to its profit in the year 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 Yi Shin Textile Industrial.

Our Take On Yi Shin Textile Industrial's Profit Performance

As we discussed above, we think the significant positive unusual item makes Yi Shin Textile Industrial's earnings a poor guide to its underlying profitability. For this reason, we think that Yi Shin Textile 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. Sadly, its EPS was down over the last twelve months. 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 Yi Shin Textile Industrial as a business, it's important to be aware of any risks it's facing. For example, Yi Shin Textile Industrial has 5 warning signs (and 2 which make us uncomfortable) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Yi Shin Textile Industrial's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.