We Think You Should Be Aware Of Some Concerning Factors In Great China Metal Ind's (TWSE:9905) Earnings

Great China Metal Ind. Co., Ltd.'s (TWSE:9905) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

View our latest analysis for Great China Metal Ind

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Great China Metal Ind's profit received a boost of NT$46m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. 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).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Great China Metal Ind's Profit Performance

Arguably, Great China Metal Ind's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Great China Metal Ind's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 6.4% EPS growth in 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 2 warning signs for Great China Metal Ind (1 is concerning) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Great China Metal Ind'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. 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.