The market for Computer And Technologies Holdings Limited's (HKG:46) shares didn't move much after it posted weak earnings recently. 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 Computer And Technologies Holdings' profit was reduced by HK$3.1m, due to unusual items, over the last year. 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Computer And Technologies Holdings to produce a higher profit next year, all else being equal.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Computer And Technologies Holdings.
Our Take On Computer And Technologies Holdings' Profit Performance
Unusual items (expenses) detracted from Computer And Technologies Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Computer And Technologies Holdings' statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. So while earnings quality is important, it's equally important to consider the risks facing Computer And Technologies Holdings at this point in time. For instance, we've identified 3 warning signs for Computer And Technologies Holdings (1 makes us a bit uncomfortable) you should be familiar with.
This note has only looked at a single factor that sheds light on the nature of Computer And Technologies 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. 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.