Soft earnings didn't appear to concern Precious Dragon Technology Holdings Limited's (HKG:1861) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Precious Dragon Technology Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$6.7m 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Precious Dragon Technology Holdings to produce a higher profit next year, all else being equal.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Precious Dragon Technology Holdings.
Our Take On Precious Dragon Technology Holdings' Profit Performance
Because unusual items detracted from Precious Dragon Technology 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 Precious Dragon Technology Holdings' earnings potential is at least as good as it seems, and maybe even better! Better yet, its EPS are growing strongly, which is nice to see. 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 - Precious Dragon Technology Holdings has 4 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 Precious Dragon Technology 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.