Yuen Foong Yu Consumer Products Co., Ltd.'s (GTSM:6790 ) stock didn't jump after it announced some healthy earnings. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.
The Impact Of Unusual Items On Profit
To properly understand Yuen Foong Yu Consumer Products' profit results, we need to consider the NT$217m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If Yuen Foong Yu Consumer Products 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 Yuen Foong Yu Consumer Products.
Our Take On Yuen Foong Yu Consumer Products' Profit Performance
Arguably, Yuen Foong Yu Consumer Products' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Yuen Foong Yu Consumer Products' statutory profits are better than its underlying earnings power. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that Yuen Foong Yu Consumer Products is showing 4 warning signs in our investment analysis and 1 of those is significant...
This note has only looked at a single factor that sheds light on the nature of Yuen Foong Yu Consumer Products' 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. 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.
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