Should You Use Bortex Global's (HKG:8118) Statutory Earnings To Analyse It?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. In this article, we'll look at how useful this year's statutory profit is, when analysing Bortex Global (HKG:8118).

It's good to see that over the last twelve months Bortex Global made a profit of HK$22.8m on revenue of HK$201.5m. In the chart below, you can see that its profit and revenue have both grown over the last three years, although its profit has slipped in the last twelve months.

View our latest analysis for Bortex Global

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Bortex Global's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Bortex Global.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Bortex Global's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$4.6m 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. If Bortex Global doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Bortex Global's Profit Performance

Because unusual items detracted from Bortex Global'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 Bortex Global's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. If you want to do dive deeper into Bortex Global, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Bortex Global has 1 warning sign and it would be unwise to ignore it.

This note has only looked at a single factor that sheds light on the nature of Bortex Global's 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. 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. 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.
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