Are Evergreen International Storage & Transport's (TPE:2607) Statutory Earnings A Good Reflection Of Its Earnings Potential?

As a general rule, we think profitable companies are less risky than companies that lose money. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. In this article, we'll look at how useful this year's statutory profit is, when analysing Evergreen International Storage & Transport (TPE:2607).

It's good to see that over the last twelve months Evergreen International Storage & Transport made a profit of NT$768.8m on revenue of NT$7.17b. As you can see in the chart below, its profit has been pretty flat over the last few years, while its revenue has actually declined.

Check out our latest analysis for Evergreen International Storage & Transport

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 Evergreen International Storage & Transport's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Evergreen International Storage & Transport.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Evergreen International Storage & Transport's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$79m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. 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).

Our Take On Evergreen International Storage & Transport's Profit Performance

Arguably, Evergreen International Storage & Transport's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Evergreen International Storage & Transport's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Evergreen International Storage & Transport has 1 warning sign and it would be unwise to ignore it.

Today we've zoomed in on a single data point to better understand the nature of Evergreen International Storage & Transport'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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