TienPin United Enterprise (GTSM:6199) Strong Profits May Be Masking Some Underlying Issues

TienPin United Enterprise CO., LTD.'s (GTSM:6199) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for TienPin United Enterprise

How Do Unusual Items Influence Profit?

To properly understand TienPin United Enterprise's profit results, we need to consider the NT$36m 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. And, after all, that's exactly what the accounting terminology implies. TienPin United Enterprise had a rather significant contribution from unusual items relative to its profit 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 TienPin United Enterprise.

Our Take On TienPin United Enterprise's Profit Performance

As previously mentioned, TienPin United Enterprise's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that TienPin United Enterprise's underlying earnings power is lower than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the 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 TienPin United Enterprise, you'd also look into what risks it is currently facing. To help with this, we've discovered 5 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in TienPin United Enterprise.

This note has only looked at a single factor that sheds light on the nature of TienPin United Enterprise'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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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