The market wasn't impressed with the soft earnings from Hai Leck Holdings Limited (SGX:BLH) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Hai Leck Holdings' profit received a boost of S$488k in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. 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 Hai Leck Holdings.
Our Take On Hai Leck Holdings' Profit Performance
Arguably, Hai Leck Holdings' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Hai Leck Holdings' true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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. If you want to do dive deeper into Hai Leck Holdings, you'd also look into what risks it is currently facing. For example, Hai Leck Holdings has 3 warning signs (and 1 which is concerning) we think you should know about.
Today we've zoomed in on a single data point to better understand the nature of Hai Leck 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.