Investors Shouldn't Be Too Comfortable With Chien Shing Harbour ServiceLtd's (TPE:8367) Robust Earnings

Chien Shing Harbour Service Co.,Ltd.'s (TPE:8367) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for Chien Shing Harbour ServiceLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Chien Shing Harbour ServiceLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$44m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Chien Shing Harbour ServiceLtd.

Our Take On Chien Shing Harbour ServiceLtd's Profit Performance

Arguably, Chien Shing Harbour ServiceLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Chien Shing Harbour ServiceLtd's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 47% over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Chien Shing Harbour ServiceLtd, and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Chien Shing Harbour ServiceLtd's 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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