Should You Use Aeon Motor's (GTSM:1599) Statutory Earnings To Analyse It?

Broadly speaking, profitable businesses are less risky than unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing Aeon Motor (GTSM:1599).

We like the fact that Aeon Motor made a profit of NT$190.5m on its revenue of NT$2.89b, in the last year. One positive is that it has grown both its profit and its revenue, over the last few years.

View our latest analysis for Aeon Motor

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Aeon Motor's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Aeon Motor.

How Do Unusual Items Influence Profit?

To properly understand Aeon Motor's profit results, we need to consider the NT$23m gain attributed to 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. 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).

Our Take On Aeon Motor's Profit Performance

Arguably, Aeon Motor's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Aeon Motor's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 58% over the last three years. 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 Aeon Motor as a business, it's important to be aware of any risks it's facing. For instance, we've identified 2 warning signs for Aeon Motor (1 can't be ignored) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Aeon Motor's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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. 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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