Does Basso Industry's (TPE:1527) Statutory Profit Adequately Reflect Its Underlying Profit?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether Basso Industry's (TPE:1527) statutory profits are a good guide to its underlying earnings.

While Basso Industry was able to generate revenue of NT$3.39b in the last twelve months, we think its profit result of NT$223.2m was more important. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

View our latest analysis for Basso Industry

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted Basso Industry'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 Basso Industry.

The Impact Of Unusual Items On Profit

To properly understand Basso Industry's profit results, we need to consider the NT$75m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Basso Industry doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Basso Industry's Profit Performance

Because unusual items detracted from Basso Industry'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 Basso Industry's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. 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. If you'd like to know more about Basso Industry as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with Basso Industry (including 1 which is potentially serious).

Today we've zoomed in on a single data point to better understand the nature of Basso Industry'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. 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. 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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