Investors signalled that they were pleased with Chanhigh Holdings Limited's (HKG:2017) most recent earnings report. This reaction by the market reaction is understandable when looking at headline profits and we have found some further encouraging factors.
Check out our latest analysis for Chanhigh Holdings
The Impact Of Unusual Items On Profit
To properly understand Chanhigh Holdings' profit results, we need to consider the CN¥6.4m 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 Chanhigh Holdings 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 Chanhigh Holdings.
Our Take On Chanhigh Holdings' Profit Performance
Because unusual items detracted from Chanhigh Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Chanhigh Holdings' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 5.6% in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Chanhigh Holdings has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.
This note has only looked at a single factor that sheds light on the nature of Chanhigh 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.
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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.