Progressive Path Group Holdings' (HKG:1581) Solid Profits Have Weak Fundamentals

Despite posting some strong earnings, the market for Progressive Path Group Holdings Limited's (HKG:1581) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

Check out our latest analysis for Progressive Path Group Holdings

The Impact Of Unusual Items On Profit

For anyone who wants to understand Progressive Path Group Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$4.7m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Progressive Path Group Holdings had a rather significant contribution from unusual items relative to its profit to March 2022. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Progressive Path Group Holdings.

Our Take On Progressive Path Group Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes Progressive Path Group Holdings' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Progressive Path Group Holdings' underlying earnings power is lower than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 4 warning signs for Progressive Path Group Holdings you should be mindful of and 2 of these bad boys are concerning.

Today we've zoomed in on a single data point to better understand the nature of Progressive Path Group Holdings' 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. 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 that insiders are buying 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.