ANJI Technology's (TWSE:6477) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with ANJI Technology Co., Ltd.'s (TWSE:6477) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for ANJI Technology

The Impact Of Unusual Items On Profit

For anyone who wants to understand ANJI Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by NT$127m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. ANJI Technology took a rather significant hit from unusual items in the year to December 2023. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of ANJI Technology.

Our Take On ANJI Technology's Profit Performance

As we mentioned previously, the ANJI Technology's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that ANJI Technology's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into ANJI Technology, you'd also look into what risks it is currently facing. Case in point: We've spotted 4 warning signs for ANJI Technology you should be mindful of and 1 of them can't be ignored.

This note has only looked at a single factor that sheds light on the nature of ANJI Technology'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 that insiders are buying 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.