Despite posting some strong earnings, the market for Keck Seng Investments (Hong Kong) Limited's (HKG:184) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.
View our latest analysis for Keck Seng Investments (Hong Kong)
How Do Unusual Items Influence Profit?
For anyone who wants to understand Keck Seng Investments (Hong Kong)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$25m 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 that's as you'd expect, given these boosts are described as 'unusual'. 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).
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Keck Seng Investments (Hong Kong).
Our Take On Keck Seng Investments (Hong Kong)'s Profit Performance
Arguably, Keck Seng Investments (Hong Kong)'s statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Keck Seng Investments (Hong Kong)'s true underlying earnings power is actually less than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. In terms of investment risks, we've identified 1 warning sign with Keck Seng Investments (Hong Kong), and understanding this should be part of your investment process.
This note has only looked at a single factor that sheds light on the nature of Keck Seng Investments (Hong Kong)'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.