Towngas Smart Energy Company Limited's (HKG:1083) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Towngas Smart Energy's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$321m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If Towngas Smart Energy doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Towngas Smart Energy's Profit Performance
We'd posit that Towngas Smart Energy's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Towngas Smart Energy's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 58% EPS growth in the last year. 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 Towngas Smart Energy, you'd also look into what risks it is currently facing. For example, we've found that Towngas Smart Energy has 3 warning signs (1 is a bit concerning!) that deserve your attention before going any further with your analysis.
This note has only looked at a single factor that sheds light on the nature of Towngas Smart Energy's 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. 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.