The market was pleased with the recent earnings report from Kingboard Holdings Limited (HKG:148), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.
We've discovered 3 warning signs about Kingboard Holdings. View them for free.
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Kingboard Holdings' profit was reduced by HK$1.5b, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Kingboard Holdings doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.
Our Take On Kingboard Holdings' Profit Performance
Because unusual items detracted from Kingboard Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Kingboard Holdings' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Kingboard Holdings at this point in time. Our analysis shows 3 warning signs for Kingboard Holdings (1 is concerning!) and we strongly recommend you look at these before investing.
This note has only looked at a single factor that sheds light on the nature of Kingboard 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.