Automated Systems Holdings Limited's (HKG:771) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

Check out our latest analysis for Automated Systems Holdings

How Do Unusual Items Influence Profit?

To properly understand Automated Systems Holdings' profit results, we need to consider the HK$90m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Automated Systems Holdings had a rather significant contribution from unusual items relative to its profit to June 2022. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger 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 Automated Systems Holdings.

Our Take On Automated Systems Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes Automated Systems Holdings' earnings a poor guide to its underlying profitability. For this reason, we think that Automated Systems Holdings' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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 Automated Systems Holdings as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with Automated Systems Holdings (including 1 which can't be ignored).

Today we've zoomed in on a single data point to better understand the nature of Automated Systems 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. 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.