Shareholders Will Be Pleased With The Quality of Tong Hsing Electronic Industries' (TWSE:6271) Earnings

Even though Tong Hsing Electronic Industries, Ltd. (TWSE:6271 ) posted strong earnings, investors appeared to be underwhelmed. We did some digging and actually think they are being unnecessarily pessimistic.

Check out our latest analysis for Tong Hsing Electronic Industries

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Tong Hsing Electronic Industries' profit was reduced by NT$287m, due to unusual items, over the last year. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Tong Hsing Electronic Industries to produce a higher profit next year, all else being equal.

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 Tong Hsing Electronic Industries' Profit Performance

Unusual items (expenses) detracted from Tong Hsing Electronic Industries' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Tong Hsing Electronic Industries' statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 62% 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Tong Hsing Electronic Industries and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of Tong Hsing Electronic Industries' profit. But there are plenty of other ways to inform your opinion of a company. 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.