We Think Miramar Hotel and Investment Company's (HKG:71) Healthy Earnings Might Be Conservative

Simply Wall St ·  May 3, 2022 18:52

Miramar Hotel and Investment Company, Limited's (HKG:71) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

See our latest analysis for Miramar Hotel and Investment Company

SEHK:71 Earnings and Revenue History May 3rd 2022

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Miramar Hotel and Investment Company's profit was reduced by HK$114m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If Miramar Hotel and Investment Company doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Miramar Hotel and Investment Company.

Our Take On Miramar Hotel and Investment Company's Profit Performance

Because unusual items detracted from Miramar Hotel and Investment Company'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 Miramar Hotel and Investment Company's statutory profit actually understates its earnings potential! And the EPS is up 9.3% over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Miramar Hotel and Investment Company at this point in time. When we did our research, we found 3 warning signs for Miramar Hotel and Investment Company (1 can't be ignored!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Miramar Hotel and Investment Company'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. 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.

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