We Think That There Are Issues Underlying Shin Tai Industry's (TWSE:1235) Earnings

Despite announcing strong earnings, Shin Tai Industry Co., Ltd.'s (TWSE:1235) stock was sluggish. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

View our latest analysis for Shin Tai Industry

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shin Tai Industry's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$2.3m 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. If Shin Tai Industry doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shin Tai Industry.

Our Take On Shin Tai Industry's Profit Performance

Arguably, Shin Tai Industry's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shin Tai Industry's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Shin Tai Industry you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shin Tai Industry'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.

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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.