The market shrugged off the recent earnings report from Shenzhen HeungKong Holding Co.,Ltd (SHSE:600162), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

See our latest analysis for Shenzhen HeungKong HoldingLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shenzhen HeungKong HoldingLtd's profit was reduced by CN¥225m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 Shenzhen HeungKong HoldingLtd 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 Shenzhen HeungKong HoldingLtd.

Our Take On Shenzhen HeungKong HoldingLtd's Profit Performance

Because unusual items detracted from Shenzhen HeungKong HoldingLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Shenzhen HeungKong HoldingLtd's 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. If you want to do dive deeper into Shenzhen HeungKong HoldingLtd, you'd also look into what risks it is currently facing. Case in point: We've spotted 4 warning signs for Shenzhen HeungKong HoldingLtd you should be mindful of and 1 of these is significant.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen HeungKong HoldingLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.