Even though South Manganese Investment Limited's (HKG:1091) recent earnings release was robust, the market didn't seem to notice. Our analysis suggests that investors might be missing some promising details.

Check out our latest analysis for South Manganese Investment

How Do Unusual Items Influence Profit?

To properly understand South Manganese Investment's profit results, we need to consider the HK$303m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect South Manganese Investment 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 South Manganese Investment.

Our Take On South Manganese Investment's Profit Performance

Unusual items (expenses) detracted from South Manganese Investment's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that South Manganese Investment's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite 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 South Manganese Investment as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for South Manganese Investment you should know about.

Today we've zoomed in on a single data point to better understand the nature of South Manganese Investment'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. 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.