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Investors Shouldn't Be Too Comfortable With Tianjin Development Holdings' (HKG:882) Robust Earnings

Simply Wall St ·  05/05 07:12

Tianjin Development Holdings Limited (HKG:882) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

See our latest analysis for Tianjin Development Holdings

SEHK:882 Earnings and Revenue History May 4th 2022

How Do Unusual Items Influence Profit?

For anyone who wants to understand Tianjin Development Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$34m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Tianjin Development Holdings doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tianjin Development Holdings.

Our Take On Tianjin Development Holdings' Profit Performance

Arguably, Tianjin Development Holdings' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Tianjin Development Holdings' statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 26% over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 2 warning signs for Tianjin Development Holdings (1 is a bit concerning!) and we strongly recommend you look at them before investing .

Today we've zoomed in on a single data point to better understand the nature of Tianjin Development Holdings' 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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