Universal Cement's (TWSE:1104) Soft Earnings Are Actually Better Than They Appear

The market for Universal Cement Corporation's (TWSE:1104) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

Check out our latest analysis for Universal Cement

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Universal Cement's profit was reduced by NT$116m, due to unusual items, over the last year. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Universal Cement to produce a higher profit next year, all else being equal.

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

Our Take On Universal Cement's Profit Performance

Unusual items (expenses) detracted from Universal Cement's earnings over the last year, but we might see an improvement next year. Because of this, we think Universal Cement's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 42% annually, over the last three years. 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 Universal Cement as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Universal Cement, and understanding it should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Universal Cement'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. 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.