We Think That There Are Some Issues For Taiwan Oasis Technology (GTSM:3066) Beyond Its Promising Earnings

The stock price didn't jump after Taiwan Oasis Technology Co., Ltd. (GTSM:3066) posted decent earnings last week. We think that investors might be worried about some concerning underlying factors.

See our latest analysis for Taiwan Oasis Technology

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Taiwan Oasis Technology's profit received a boost of NT$32m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. Which is hardly surprising, given the name. We can see that Taiwan Oasis Technology's positive unusual items were quite significant relative to its profit in the year to December 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Taiwan Oasis Technology.

Our Take On Taiwan Oasis Technology's Profit Performance

As previously mentioned, Taiwan Oasis Technology's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Taiwan Oasis Technology's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. If you want to do dive deeper into Taiwan Oasis Technology, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for Taiwan Oasis Technology (1 is a bit unpleasant!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Taiwan Oasis Technology's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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. 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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