Shareholders appeared unconcerned with Hang Lung Group Limited's (HKG:10) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.
Check out our latest analysis for Hang Lung Group
The Impact Of Unusual Items On Profit
For anyone who wants to understand Hang Lung Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$993m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Hang Lung Group 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 Hang Lung Group.
Our Take On Hang Lung Group's Profit Performance
Unusual items (expenses) detracted from Hang Lung Group's earnings over the last year, but we might see an improvement next year. Because of this, we think Hang Lung Group's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 29% annually, over the last three years. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, Hang Lung Group has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.
Today we've zoomed in on a single data point to better understand the nature of Hang Lung Group's 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 with high insider ownership.
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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.