Ta Ya Electric Wire & Cable's (TWSE:1609) Earnings Might Be Weaker Than You Think

Ta Ya Electric Wire & Cable Co., Ltd. (TWSE:1609) posted some decent earnings, but shareholders didn't react strongly. We think that they might be concerned about some underlying details that our analysis found.

View our latest analysis for Ta Ya Electric Wire & Cable

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Ta Ya Electric Wire & Cable expanded the number of shares on issue by 6.9% over the last year. That means its earnings are split among a greater number of shares. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. You can see a chart of Ta Ya Electric Wire & Cable's EPS by clicking here.

A Look At The Impact Of Ta Ya Electric Wire & Cable's Dilution On Its Earnings Per Share (EPS)

As you can see above, Ta Ya Electric Wire & Cable has been growing its net income over the last few years, with an annualized gain of 225% over three years. In comparison, earnings per share only gained 198% over the same period. And at a glance the 228% gain in profit over the last year impresses. On the other hand, earnings per share are only up 218% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, earnings per share growth should beget share price growth. So Ta Ya Electric Wire & Cable shareholders will want to see that EPS figure continue to increase. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ta Ya Electric Wire & Cable.

The Impact Of Unusual Items On Profit

Alongside that dilution, it's also important to note that Ta Ya Electric Wire & Cable's profit was boosted by unusual items worth NT$1.6b in the last twelve months. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Ta Ya Electric Wire & Cable's positive unusual items were quite significant relative to its profit in the year to December 2023. 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 Ya Electric Wire & Cable's Profit Performance

To sum it all up, Ta Ya Electric Wire & Cable got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. For the reasons mentioned above, we think that a perfunctory glance at Ta Ya Electric Wire & Cable's statutory profits might make it look better than it really is on an underlying level. If you want to do dive deeper into Ta Ya Electric Wire & Cable, you'd also look into what risks it is currently facing. To that end, you should learn about the 3 warning signs we've spotted with Ta Ya Electric Wire & Cable (including 1 which is a bit unpleasant).

Our examination of Ta Ya Electric Wire & Cable has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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. 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.