Are Taiwan Glass Ind's (TPE:1802) Statutory Earnings A Good Guide To Its Underlying Profitability?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. 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. In this article, we'll look at how useful this year's statutory profit is, when analysing Taiwan Glass Ind (TPE:1802).

While Taiwan Glass Ind was able to generate revenue of NT$40.0b in the last twelve months, we think its profit result of NT$236.6m was more important.

Check out our latest analysis for Taiwan Glass Ind

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 discuss how unusual items have impacted Taiwan Glass Ind's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Taiwan Glass Ind.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Taiwan Glass Ind's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$76m 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. 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 Taiwan Glass Ind's Profit Performance

We'd posit that Taiwan Glass Ind's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Taiwan Glass Ind's statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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. If you'd like to know more about Taiwan Glass Ind as a business, it's important to be aware of any risks it's facing. For example - Taiwan Glass Ind has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Taiwan Glass Ind'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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