ChipMOS TECHNOLOGIES' (TWSE:8150) Solid Earnings May Rest On Weak Foundations

The stock price didn't jump after ChipMOS TECHNOLOGIES INC. (TWSE:8150) posted decent earnings last week. We did some digging and believe investors may be worried about some underlying factors in the report.

View our latest analysis for ChipMOS TECHNOLOGIES

The Impact Of Unusual Items On Profit

To properly understand ChipMOS TECHNOLOGIES' profit results, we need to consider the NT$134m 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 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. Which is hardly surprising, given the name. If ChipMOS TECHNOLOGIES doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 ChipMOS TECHNOLOGIES' Profit Performance

We'd posit that ChipMOS TECHNOLOGIES' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that ChipMOS TECHNOLOGIES' true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 6.6% EPS growth in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into ChipMOS TECHNOLOGIES, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for ChipMOS TECHNOLOGIES and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of ChipMOS TECHNOLOGIES' 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. 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.