Soft earnings didn't appear to concern Telecom Digital Holdings Limited's (HKG:6033) shareholders over the last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for Telecom Digital Holdings

The Impact Of Unusual Items On Profit

For anyone who wants to understand Telecom Digital Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$16m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Telecom Digital Holdings to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Telecom Digital Holdings.

Our Take On Telecom Digital Holdings' Profit Performance

Unusual items (expenses) detracted from Telecom Digital Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Telecom Digital Holdings' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 2 warning signs for Telecom Digital Holdings and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Telecom Digital Holdings' 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.