Are Copartner Technology's (TPE:3550) Statutory Earnings A Good Reflection Of Its Earnings Potential?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. 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. This article will consider whether Copartner Technology's (TPE:3550) statutory profits are a good guide to its underlying earnings.

We like the fact that Copartner Technology made a profit of NT$64.7m on its revenue of NT$3.47b, in the last year. The chart below shows that both revenue and profit have declined over the last three years.

See our latest analysis for Copartner Technology

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Copartner Technology'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 Copartner Technology.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Copartner Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by NT$14m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Copartner Technology to produce a higher profit next year, all else being equal.

Our Take On Copartner Technology's Profit Performance

Because unusual items detracted from Copartner Technology's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Copartner Technology's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 51% in the 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To help with this, we've discovered 4 warning signs (2 are significant!) that you ought to be aware of before buying any shares in Copartner Technology.

Today we've zoomed in on a single data point to better understand the nature of Copartner Technology'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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