There May Be Underlying Issues With The Quality Of Tyntek's (TWSE:2426) Earnings

Despite announcing strong earnings, Tyntek Corporation's (TWSE:2426) stock was sluggish. We did some digging and found some worrying underlying problems.

See our latest analysis for Tyntek

The Impact Of Unusual Items On Profit

For anyone who wants to understand Tyntek's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$551k worth of 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. 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 Tyntek 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 Tyntek.

Our Take On Tyntek's Profit Performance

Arguably, Tyntek's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Tyntek's statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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. If you'd like to know more about Tyntek as a business, it's important to be aware of any risks it's facing. For example - Tyntek has 2 warning signs we think you should be aware of.

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