Last week's earnings announcement from Oriental Enterprise Holdings Limited (HKG:18) was disappointing to investors, with a sluggish profit figure. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

Check out our latest analysis for Oriental Enterprise Holdings

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Oriental Enterprise Holdings' profit received a boost of HK$34m 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. 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. Oriental Enterprise Holdings had a rather significant contribution from unusual items relative to its profit to September 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On Oriental Enterprise Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes Oriental Enterprise Holdings' earnings a poor guide to its underlying profitability. For this reason, we think that Oriental Enterprise Holdings' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you want to do dive deeper into Oriental Enterprise Holdings, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Oriental Enterprise Holdings you should know about.

This note has only looked at a single factor that sheds light on the nature of Oriental Enterprise 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. 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.