Ruentex DevelopmentLtd's (TWSE:9945) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with Ruentex Development Co.,Ltd.'s (TWSE:9945) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

Check out our latest analysis for Ruentex DevelopmentLtd

The Impact Of Unusual Items On Profit

To properly understand Ruentex DevelopmentLtd's profit results, we need to consider the NT$872m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Ruentex DevelopmentLtd 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 Ruentex DevelopmentLtd.

Our Take On Ruentex DevelopmentLtd's Profit Performance

Because unusual items detracted from Ruentex DevelopmentLtd'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 Ruentex DevelopmentLtd's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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 3 warning signs for Ruentex DevelopmentLtd (2 are a bit unpleasant) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Ruentex DevelopmentLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.