Does Lungyen Life Service's (GTSM:5530) 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. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. This article will consider whether Lungyen Life Service's (GTSM:5530) statutory profits are a good guide to its underlying earnings.

While Lungyen Life Service was able to generate revenue of NT$3.80b in the last twelve months, we think its profit result of NT$1.29b was more important. Below, you can see that both its revenue and its profit have fallen over the last three years.

View our latest analysis for Lungyen Life Service

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Lungyen Life Service's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Lungyen Life Service.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Lungyen Life Service's profit received a boost of NT$153m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Our Take On Lungyen Life Service's Profit Performance

Arguably, Lungyen Life Service's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Lungyen Life Service's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Lungyen Life Service as a business, it's important to be aware of any risks it's facing. For example - Lungyen Life Service has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Lungyen Life Service'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 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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