The subdued market reaction suggests that Boltek Holdings Limited's (HKG:8601) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.
See our latest analysis for Boltek Holdings
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Boltek Holdings' profit received a boost of HK$4.0m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Boltek Holdings.
Our Take On Boltek Holdings' Profit Performance
Arguably, Boltek Holdings' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Boltek Holdings' true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 21% per annum growth in EPS for the last three. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Boltek Holdings has 3 warning signs we think you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Boltek 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.