YungShin Global Holding's (TPE:3705) Earnings Are Growing But Is There More To The Story?

Broadly speaking, profitable businesses are less risky than unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding YungShin Global Holding (TPE:3705).

We like the fact that YungShin Global Holding made a profit of NT$838.9m on its revenue of NT$8.15b, in the last year. One positive is that it has grown both its profit and its revenue, over the last few years.

Check out our latest analysis for YungShin Global Holding

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on YungShin Global Holding's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of YungShin Global Holding.

How Do Unusual Items Influence Profit?

To properly understand YungShin Global Holding's profit results, we need to consider the NT$73m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. If YungShin Global Holding doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On YungShin Global Holding's Profit Performance

We'd posit that YungShin Global Holding's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that YungShin Global Holding's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 65% per annum growth in EPS for the last three. 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. 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. Our analysis shows 3 warning signs for YungShin Global Holding (1 makes us a bit uncomfortable!) and we strongly recommend you look at these bad boys before investing.

Today we've zoomed in on a single data point to better understand the nature of YungShin Global Holding'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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