We Think Evertop Wire Cable's (TWSE:1616) Robust Earnings Are Conservative

Evertop Wire Cable Corporation (TWSE:1616) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

See our latest analysis for Evertop Wire Cable

How Do Unusual Items Influence Profit?

For anyone who wants to understand Evertop Wire Cable's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by NT$46m 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 Evertop Wire Cable to produce a higher profit next year, all else being equal.

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

Our Take On Evertop Wire Cable's Profit Performance

Because unusual items detracted from Evertop Wire Cable'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 Evertop Wire Cable's statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 1 warning sign for Evertop Wire Cable and you'll want to know about this.

Today we've zoomed in on a single data point to better understand the nature of Evertop Wire Cable's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.