We Think That There Are Some Issues For Tonlin Department StoreLtd (TWSE:2910) Beyond Its Promising Earnings

The recent earnings posted by Tonlin Department Store Co.,Ltd. (TWSE:2910) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

See our latest analysis for Tonlin Department StoreLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Tonlin Department StoreLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$40m 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. 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'. If Tonlin Department StoreLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tonlin Department StoreLtd.

Our Take On Tonlin Department StoreLtd's Profit Performance

We'd posit that Tonlin Department StoreLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Tonlin Department StoreLtd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 53% per annum growth in EPS for the last three. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. 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 discovered 1 warning sign that you should run your eye over to get a better picture of Tonlin Department StoreLtd.

Today we've zoomed in on a single data point to better understand the nature of Tonlin Department StoreLtd'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 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.