Shareholders Will Be Pleased With The Quality of Chia Hsin Cement's (TWSE:1103) Earnings

The subdued stock price reaction suggests that Chia Hsin Cement Corporation's (TWSE:1103) strong earnings didn't offer any surprises. Investors are probably missing some underlying factors which are encouraging for the future of the company.

See our latest analysis for Chia Hsin Cement

How Do Unusual Items Influence Profit?

For anyone who wants to understand Chia Hsin Cement's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by NT$43m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Chia Hsin Cement took a rather significant hit from unusual items in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Chia Hsin Cement.

Our Take On Chia Hsin Cement's Profit Performance

As we discussed above, we think the significant unusual expense will make Chia Hsin Cement's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Chia Hsin Cement's statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS over the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Chia Hsin Cement (including 1 which can't be ignored).

This note has only looked at a single factor that sheds light on the nature of Chia Hsin Cement'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. 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 with significant insider holdings to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.