The market seemed underwhelmed by last week's earnings announcement from Nameson Holdings Limited (HKG:1982) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.
See our latest analysis for Nameson Holdings
How Do Unusual Items Influence Profit?
For anyone who wants to understand Nameson Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$75m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Nameson Holdings 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 Nameson Holdings.
Our Take On Nameson Holdings' Profit Performance
Unusual items (expenses) detracted from Nameson Holdings' earnings over the last year, but we might see an improvement next year. Because of this, we think Nameson Holdings' earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 13% 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that Nameson Holdings has 1 warning sign and it would be unwise to ignore it.
This note has only looked at a single factor that sheds light on the nature of Nameson Holdings' 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.