Shareholders Can Be Confident That Hainan Development HoldingsNanhai's (SZSE:002163) Earnings Are High Quality

Even though Hainan Development HoldingsNanhai Co., Ltd.'s (SZSE:002163) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

Check out our latest analysis for Hainan Development HoldingsNanhai

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hainan Development HoldingsNanhai's profit was reduced by CN¥54m, 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 that's hardly a surprise given these line items are considered unusual. Hainan Development HoldingsNanhai took a rather significant hit from unusual items in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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 Hainan Development HoldingsNanhai's Profit Performance

As we discussed above, we think the significant unusual expense will make Hainan Development HoldingsNanhai's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Hainan Development HoldingsNanhai's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Hainan Development HoldingsNanhai at this point in time. For example - Hainan Development HoldingsNanhai has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Hainan Development HoldingsNanhai'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 that insiders are buying.

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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.