Robust Earnings May Not Tell The Whole Story For Sea & Land Integrated (GTSM:5603)

Sea & Land Integrated Corp. (GTSM:5603) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Sea & Land Integrated

The Impact Of Unusual Items On Profit

To properly understand Sea & Land Integrated's profit results, we need to consider the NT$85m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Sea & Land Integrated had a rather significant contribution from unusual items relative to its profit to December 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger 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 Sea & Land Integrated.

Our Take On Sea & Land Integrated's Profit Performance

As we discussed above, we think the significant positive unusual item makes Sea & Land Integrated's earnings a poor guide to its underlying profitability. For this reason, we think that Sea & Land Integrated's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 6 warning signs for Sea & Land Integrated you should be mindful of and 1 of these can't be ignored.

Today we've zoomed in on a single data point to better understand the nature of Sea & Land Integrated'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. 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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