Taiwan Fertilizer's (TWSE:1722) Earnings Seem To Be Promising

Taiwan Fertilizer Co., Ltd.'s (TWSE:1722) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

Check out our latest analysis for Taiwan Fertilizer

How Do Unusual Items Influence Profit?

To properly understand Taiwan Fertilizer's profit results, we need to consider the NT$312m expense attributed 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 Taiwan Fertilizer 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 Taiwan Fertilizer.

Our Take On Taiwan Fertilizer's Profit Performance

Unusual items (expenses) detracted from Taiwan Fertilizer's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Taiwan Fertilizer's statutory profit actually understates its earnings potential! And the EPS is up 60% annually, over the last three years. 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 want to do dive deeper into Taiwan Fertilizer, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Taiwan Fertilizer, and understanding this should be part of your investment process.

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