Additional Considerations Required While Assessing Taiwan Glass Ind's (TWSE:1802) Strong Earnings

Despite announcing strong earnings, Taiwan Glass Ind. Corp.'s (TWSE:1802) stock was sluggish. We did some digging and found some worrying underlying problems.

View our latest analysis for Taiwan Glass Ind

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Taiwan Glass Ind's profit received a boost of NT$256m in unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. Taiwan Glass Ind had a rather significant contribution from unusual items relative to its profit to December 2023. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Taiwan Glass Ind.

Our Take On Taiwan Glass Ind's Profit Performance

As we discussed above, we think the significant positive unusual item makes Taiwan Glass Ind's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Taiwan Glass Ind's underlying earnings power is lower than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. At Simply Wall St, we found 1 warning sign for Taiwan Glass Ind and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Taiwan Glass Ind's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.