Should You Use Chicony Power Technology's (TPE:6412) Statutory Earnings To Analyse It?

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. In this article, we'll look at how useful this year's statutory profit is, when analysing Chicony Power Technology (TPE:6412).

It's good to see that over the last twelve months Chicony Power Technology made a profit of NT$1.94b on revenue of NT$34.5b. We can see in the depiction below that while it did manage to grow its revenue over the last three years, profit has been pretty flat.

View our latest analysis for Chicony Power Technology

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 Chicony Power Technology's statutory earnings. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

How Do Unusual Items Influence Profit?

To properly understand Chicony Power Technology's profit results, we need to consider the NT$355m expense attributed 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Chicony Power Technology to produce a higher profit next year, all else being equal.

Our Take On Chicony Power Technology's Profit Performance

Because unusual items detracted from Chicony Power Technology's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Chicony Power Technology's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 19% 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. If you'd like to know more about Chicony Power Technology as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Chicony Power Technology you should know about.

This note has only looked at a single factor that sheds light on the nature of Chicony Power Technology'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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