Shareholders Can Be Confident That ACES Electronics' (TWSE:3605) Earnings Are High Quality

The subdued stock price reaction suggests that ACES Electronics Co., Ltd.'s (TWSE:3605) strong earnings didn't offer any surprises. We think that investors have missed some encouraging factors underlying the profit figures.

View our latest analysis for ACES Electronics

How Do Unusual Items Influence Profit?

To properly understand ACES Electronics' profit results, we need to consider the NT$17m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If ACES Electronics doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 ACES Electronics' Profit Performance

Because unusual items detracted from ACES Electronics' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think ACES Electronics' earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. 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. If you'd like to know more about ACES Electronics as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for ACES Electronics and you'll want to know about these.

This note has only looked at a single factor that sheds light on the nature of ACES Electronics' 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.