Soft earnings didn't appear to concern Health and Happiness (H&H) International Holdings Limited's (HKG:1112) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Health and Happiness (H&H) International Holdings' profit was reduced by CN¥271m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Health and Happiness (H&H) International Holdings doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Health and Happiness (H&H) International Holdings' Profit Performance

Unusual items (expenses) detracted from Health and Happiness (H&H) International Holdings' earnings over the last year, but we might see an improvement next year. Because of this, we think Health and Happiness (H&H) International Holdings' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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 while earnings quality is important, it's equally important to consider the risks facing Health and Happiness (H&H) International Holdings at this point in time. Case in point: We've spotted 3 warning signs for Health and Happiness (H&H) International Holdings you should be mindful of and 1 of these is concerning.

Today we've zoomed in on a single data point to better understand the nature of Health and Happiness (H&H) International 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. 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.