San Fang Chemical Industry (TWSE:1307) Is Posting Promising Earnings But The Good News Doesn’t Stop There

Shareholders appeared to be happy with San Fang Chemical Industry Co., Ltd.'s (TWSE:1307) solid earnings report last week. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers.

Check out our latest analysis for San Fang Chemical Industry

The Impact Of Unusual Items On Profit

To properly understand San Fang Chemical Industry's profit results, we need to consider the NT$140m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect San Fang Chemical Industry 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 San Fang Chemical Industry.

Our Take On San Fang Chemical Industry's Profit Performance

Because unusual items detracted from San Fang Chemical Industry's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think San Fang Chemical Industry's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - San Fang Chemical Industry has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of San Fang Chemical Industry's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.

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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.