UTS Marketing Solutions Holdings Limited (HKG:6113) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. However, our analysis suggests that shareholders may be missing some factors that indicate the earnings result was not as good as it looked.
View our latest analysis for UTS Marketing Solutions Holdings
How Do Unusual Items Influence Profit?
Importantly, our data indicates that UTS Marketing Solutions Holdings' profit received a boost of RM2.5m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If UTS Marketing Solutions Holdings doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of UTS Marketing Solutions Holdings.
Our Take On UTS Marketing Solutions Holdings' Profit Performance
We'd posit that UTS Marketing Solutions Holdings' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that UTS Marketing Solutions Holdings' true underlying earnings power is actually less than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into UTS Marketing Solutions Holdings, you'd also look into what risks it is currently facing. For instance, we've identified 4 warning signs for UTS Marketing Solutions Holdings (1 can't be ignored) you should be familiar with.
This note has only looked at a single factor that sheds light on the nature of UTS Marketing Solutions 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 with significant insider holdings 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.