Investors Shouldn't Be Too Comfortable With AmTRAN TechnologyLtd's (TWSE:2489) Earnings

Investors were disappointed with AmTRAN Technology Co.,Ltd's (TWSE:2489) earnings, despite the strong profit numbers. We think that the market might be paying attention to some underlying factors that they find to be concerning.

See our latest analysis for AmTRAN TechnologyLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand AmTRAN TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$264m worth of unusual items. 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. AmTRAN TechnologyLtd had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of AmTRAN TechnologyLtd.

Our Take On AmTRAN TechnologyLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes AmTRAN TechnologyLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that AmTRAN TechnologyLtd's underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that AmTRAN TechnologyLtd has 3 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of AmTRAN TechnologyLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.