Perennial International Limited's (HKG:725) strong earnings report was rewarded with a positive stock price move. Our analysis found some more factors that we think are good for shareholders.
The Impact Of Unusual Items On Profit
To properly understand Perennial International's profit results, we need to consider the HK$7.1m expense attributed to unusual items. 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, after all, that's exactly what the accounting terminology implies. If Perennial International 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 Perennial International .
Our Take On Perennial International's Profit Performance
Unusual items (expenses) detracted from Perennial International's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Perennial International's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Perennial International has 2 warning signs we think you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Perennial International's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.