Edison Opto (TPE:3591) Is Posting Promising Earnings But The Good News Doesn’t Stop There

Edison Opto Corporation's (TPE:3591) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

See our latest analysis for Edison Opto

How Do Unusual Items Influence Profit?

For anyone who wants to understand Edison Opto's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by NT$26m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. In the twelve months to December 2020, Edison Opto had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Edison Opto.

Our Take On Edison Opto's Profit Performance

As we discussed above, we think the significant unusual expense will make Edison Opto's statutory profit lower than it would otherwise have been. Because of this, we think Edison Opto's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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 want to do dive deeper into Edison Opto, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 3 warning signs for Edison Opto and you'll want to know about them.

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