We’re Not Counting On Taiwan Land Development (TPE:2841) To Sustain Its Statutory Profitability

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 Taiwan Land Development‘s (TPE:2841) statutory profits are a good guide to its underlying earnings.

It’s good to see that over the last twelve months Taiwan Land Development made a profit of NT$448.9m on revenue of NT$373.0m. The chart below shows that both revenue and profit have declined over the last three years.

View our latest analysis for Taiwan Land Development

TSEC:2841 Income Statement, December 23rd 2019
TSEC:2841 Income Statement, December 23rd 2019

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 Taiwan Land Development’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 Taiwan Land Development.

How Do Unusual Items Influence Profit?

To properly understand Taiwan Land Development’s profit results, we need to consider the NT$1.4b gain attributed to unusual items. While it’s always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 that’s as you’d expect, given these boosts are described as ‘unusual’. We can see that Taiwan Land Development’s positive unusual items were quite significant relative to its profit in the year to September 2019. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Taiwan Land Development’s Profit Performance

As previously mentioned, Taiwan Land Development’s large boost from unusual items won’t be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Taiwan Land Development’s underlying earnings power is lower than its statutory profit. The good news is that, its earnings per share increased by 38% in 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. Just as investors must consider earnings, it is also important to take into account the strength of a company’s balance sheet. If you want to,you can see our take on Taiwan Land Development’s balance sheet by clicking here.

This note has only looked at a single factor that sheds light on the nature of Taiwan Land Development’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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.