Mi Ming Mart Holdings Limited's (HKG:8473) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.
Check out our latest analysis for Mi Ming Mart Holdings
How Do Unusual Items Influence Profit?
For anyone who wants to understand Mi Ming Mart Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$550k worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Mi Ming Mart Holdings.
Our Take On Mi Ming Mart Holdings' Profit Performance
We'd posit that Mi Ming Mart Holdings' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Mi Ming Mart Holdings' statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've found that Mi Ming Mart Holdings has 5 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.
Today we've zoomed in on a single data point to better understand the nature of Mi Ming Mart Holdings' profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.