Investors were disappointed with the weak earnings posted by Furniweb Holdings Limited (HKG:8480 ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.
The Impact Of Unusual Items On Profit
To properly understand Furniweb Holdings' profit results, we need to consider the RM2.1m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Furniweb Holdings doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Furniweb Holdings.
Our Take On Furniweb Holdings' Profit Performance
Unusual items (expenses) detracted from Furniweb Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Furniweb Holdings' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Furniweb Holdings, you'd also look into what risks it is currently facing. For example, Furniweb Holdings has 3 warning signs (and 1 which can't be ignored) we think you should know about.
This note has only looked at a single factor that sheds light on the nature of Furniweb Holdings' profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.