Why Taiwan Navigation's (TWSE:2617) Shaky Earnings Are Just The Beginning Of Its Problems

Taiwan Navigation Co., Ltd.'s (TWSE:2617) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Taiwan Navigation

The Impact Of Unusual Items On Profit

For anyone who wants to understand Taiwan Navigation's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$274m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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, after all, that's exactly what the accounting terminology implies. If Taiwan Navigation 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 Taiwan Navigation.

Our Take On Taiwan Navigation's Profit Performance

Arguably, Taiwan Navigation's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Taiwan Navigation's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 1 warning sign for Taiwan Navigation and we think they deserve your attention.

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