Shareholders appeared unconcerned with A8 New Media Group Limited's (HKG:800) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

Check out our latest analysis for A8 New Media Group

How Do Unusual Items Influence Profit?

To properly understand A8 New Media Group's profit results, we need to consider the CN¥26m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. In the twelve months to June 2022, A8 New Media Group had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker 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 A8 New Media Group.

Our Take On A8 New Media Group's Profit Performance

As we discussed above, we think the significant unusual expense will make A8 New Media Group's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that A8 New Media Group's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. If you'd like to know more about A8 New Media Group as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for A8 New Media Group and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of A8 New Media Group's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.