Long Bon InternationalLtd's (TWSE:2514) Solid Profits Have Weak Fundamentals

Despite posting some strong earnings, the market for Long Bon International Co.,Ltd's (TWSE:2514) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Long Bon InternationalLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Long Bon InternationalLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$513m worth of unusual items. 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. Long Bon InternationalLtd had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Long Bon InternationalLtd.

Our Take On Long Bon InternationalLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Long Bon InternationalLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Long Bon InternationalLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Long Bon InternationalLtd and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Long Bon InternationalLtd'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. 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.