Stock Analysis

Additional Considerations Required While Assessing Luo Lih-Fen Holding's (TWSE:6666) Strong Earnings

TWSE:6666
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Luo Lih-Fen Holding Co., Ltd. (TWSE:6666) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for Luo Lih-Fen Holding

earnings-and-revenue-history
TWSE:6666 Earnings and Revenue History March 19th 2024

How Do Unusual Items Influence Profit?

To properly understand Luo Lih-Fen Holding's profit results, we need to consider the NT$8.8m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Luo Lih-Fen Holding.

Our Take On Luo Lih-Fen Holding's Profit Performance

Arguably, Luo Lih-Fen Holding's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Luo Lih-Fen Holding's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 61% in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. 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. Every company has risks, and we've spotted 3 warning signs for Luo Lih-Fen Holding (of which 1 is potentially serious!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Luo Lih-Fen Holding'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. 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.