We're Not Counting On Ta Yih Industrial (TPE:1521) To Sustain Its Statutory Profitability

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. Today we'll focus on whether this year's statutory profits are a good guide to understanding Ta Yih Industrial (TPE:1521).

While Ta Yih Industrial was able to generate revenue of NT$4.32b in the last twelve months, we think its profit result of NT$149.7m was more important. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

View our latest analysis for Ta Yih Industrial

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Ta Yih Industrial's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ta Yih Industrial.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Ta Yih Industrial's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$42m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. Ta Yih Industrial had a rather significant contribution from unusual items relative to its profit to September 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Ta Yih Industrial's Profit Performance

As previously mentioned, Ta Yih Industrial's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Ta Yih Industrial's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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 want to do dive deeper into Ta Yih Industrial, you'd also look into what risks it is currently facing. Case in point: We've spotted 4 warning signs for Ta Yih Industrial you should be mindful of and 1 of these bad boys makes us a bit uncomfortable.

Today we've zoomed in on a single data point to better understand the nature of Ta Yih Industrial'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. 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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