Shareholders Can Be Confident That Vietnam Manufacturing and Export Processing (Holdings)'s (HKG:422) Earnings Are High Quality

Even though Vietnam Manufacturing and Export Processing (Holdings) Limited's (HKG:422) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

View our latest analysis for Vietnam Manufacturing and Export Processing (Holdings)

The Impact Of Unusual Items On Profit

For anyone who wants to understand Vietnam Manufacturing and Export Processing (Holdings)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$743k due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Vietnam Manufacturing and Export Processing (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 Vietnam Manufacturing and Export Processing (Holdings).

Our Take On Vietnam Manufacturing and Export Processing (Holdings)'s Profit Performance

Because unusual items detracted from Vietnam Manufacturing and Export Processing (Holdings)'s earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Vietnam Manufacturing and Export Processing (Holdings)'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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 2 warning signs for Vietnam Manufacturing and Export Processing (Holdings) and you'll want to know about these.

This note has only looked at a single factor that sheds light on the nature of Vietnam Manufacturing and Export Processing (Holdings)'s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.