We Wouldn't Rely On Phoenix Silicon International's (TPE:8028) Statutory Earnings As A Guide

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding Phoenix Silicon International (TPE:8028).

It's good to see that over the last twelve months Phoenix Silicon International made a profit of NT$149.9m on revenue of NT$2.46b. As you can see in the chart below, its profit has declined over the last three years, even though its revenue has increased.

View our latest analysis for Phoenix Silicon International

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 focus on the impact unusual items have had on Phoenix Silicon International's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Phoenix Silicon International.

The Impact Of Unusual Items On Profit

To properly understand Phoenix Silicon International's profit results, we need to consider the NT$49m gain attributed to unusual items. 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 Phoenix Silicon International's positive unusual items were quite significant relative to its profit in the year to September 2020. 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 Phoenix Silicon International's Profit Performance

As we discussed above, we think the significant positive unusual item makes Phoenix Silicon International'searnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Phoenix Silicon International's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. 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. At Simply Wall St, we found 4 warning signs for Phoenix Silicon International and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Phoenix Silicon International'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. 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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