ITEQ's (TWSE:6213) Earnings Are Weaker Than They Seem

Despite posting some strong earnings, the market for ITEQ Corporation's (TWSE:6213) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

Check out our latest analysis for ITEQ

How Do Unusual Items Influence Profit?

To properly understand ITEQ's profit results, we need to consider the NT$108m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On ITEQ's Profit Performance

Arguably, ITEQ's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that ITEQ's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 36% EPS growth in 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'd like to know more about ITEQ as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for ITEQ you should know about.

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