Chia Tai Enterprises International's (HKG:3839) Shareholders Have More To Worry About Than Only Soft Earnings

Simply Wall St ·  10/04/2022 06:35

A lackluster earnings announcement from Chia Tai Enterprises International Limited (HKG:3839) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for Chia Tai Enterprises International

earnings-and-revenue-historySEHK:3839 Earnings and Revenue History October 3rd 2022

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Chia Tai Enterprises International's profit received a boost of US$19m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Chia Tai Enterprises International had a rather significant contribution from unusual items relative to its profit to June 2022. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Chia Tai Enterprises International.

Our Take On Chia Tai Enterprises International's Profit Performance

As we discussed above, we think the significant positive unusual item makes Chia Tai Enterprises International's earnings a poor guide to its underlying profitability. For this reason, we think that Chia Tai Enterprises International's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. In further bad news, its earnings per share decreased in the last year. 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 Chia Tai Enterprises International, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 4 warning signs for Chia Tai Enterprises International (of which 1 is concerning!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Chia Tai Enterprises International'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.

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